The New Local Enterprise Partnerships: An Initial Assessment - Business, Innovation and Skills Committee Contents

Examination of Witnesses (Questions 195-292)

MR MARK PRISK MP, PHILIPPA LLOYD AND PHILIP RYCROFT

19 OCTOBER 2010

Q195   Chair: Good morning Minister. I think we are as fully attended as we are going to be, and although it is slightly early, if you are happy to do so can I invite you to introduce your team and make a few opening remarks if you wish to?

Mark Prisk MP: Thank you very much Mr Bailey. The team I have with me are my senior officials in this area: Philip Rycroft on my right, Philippa Lloyd on my left. I thought it might help the Committee if I just make a few brief opening remarks, which will perhaps create a shape for our discussions and help you with your inquiry.

On being elected in May the Government believed very strongly that one of our key priorities must be the growth of the economy, and a crucial element of that is to rebalance that economy. That is both in terms of sectors but also in terms of geography. To do that we need a modern framework of economic development, based on the real economic geography of the country. The elements of that framework are: first of all, a national economic leadership to make sure that we are able to improve the UK's competiveness as a whole; secondly, the formation of Local Enterprise Partnerships to replace the RDAs, which obviously is at the heart of your inquiry today; the £1 billion RGF, the Regional Growth Fund; and fourthly, something which perhaps we tend to forget, the creation of the best environment for all businesses, whether that is investment in high-speed rail or trying to make the tax system more supportive to the creation and growth of small businesses.

  The benefit of LEPs as we see them rests principally on them being development agencies that are formed around real economic geographical areas, genuine partnerships between public and private, and democratically accountable. Chair, on a practical note we meet today just before the publication of the comprehensive spending review and also before the publication of a White Paper on this very subject. I will do my best if I can to answer the Committee's questions, but I am sure members will understand that there may be areas that I can't give more detail on. What I would say, if I can Chair, is that once we are in position to know when the White Paper is forthcoming, we will make sure this Committee is kept fully informed of that.

Q196   Chair: We understand the situation and of course we will be interviewing Ministers next week to perhaps pick up on some of the things that you will not necessarily be able to cover at this meeting. You have outlined the Government's approach to this. Why is this change being made so hurriedly and how do you think LEPs will be better than RDAs in rebalancing the economy both geographically and in terms of the private and public sector?

Mark Prisk MP: I think it is important that we do act promptly, but we want to make sure it is an orderly transition. Having moved out of recession and into a period of what we hope to be sustained growth, now is a good moment to change the nature of the development agencies, and particularly for them to be relevant as we move forward in this coming Parliament and this part of the economic cycle. Why better? Because I think the LEPs, as many businesses have said to us, will be better able to focus on making local economies and local markets work better for them. That is about freeing up issues around local transport problems, planning restrictions, bureaucracy, enabling regeneration to happen on the ground; practical matters that actually affect local businesses. One of the other problems with the RDAs has been their lack of accountability in democratic terms. That is why we are moving away from a Whitehall non-departmental public body through to something that is genuinely rooted in our constituencies and our communities. I think that is an important shift as well. I think there are both economic and also accountability benefits from making that change.

Q197   Chair: Thank you. It was well known that the Conservative party, and then subsequently Government, wanted to abolish the RDAs prior to the election. I think what has taken people by surprise is the fact that it has been done before the publication of the White Paper and a clear idea of the successor organisations. Why was this done and what was the evidential basis for this decision?

Mark Prisk MP: I think one of the important shifts here is moving away from a central model of Whitehall diktat, to genuinely saying to local communities, "What matters in your area?" And letting them say to us what their priorities are. If one looks at a rural area like Cumbria or an urban area like Greater Manchester, they will have very different priorities. At the moment they are lumped together in a single agency with a border that I suspect is often more about administrative convenience for Whitehall than it is about the relevance of shaping that local economy. That is why we feel it is important to make that move. I think we feel that making this shift now, yes it is prompt, but it is not overly hasty because I think we felt it was important that we actually say to local communities, "What are your priorities?" If we had come forward and said, "What are your priorities, but by the way we have already decided what the rules are," then I think there would be a natural scepticism among people that the Government had already decided what they should be doing. So we genuinely took the view that we should invite people, with few prescriptions at the beginning, to put forward what they would like to achieve.

Q198   Mr Binley: Good morning Minister, we are delighted to see you. I think we need to know in general terms how you feel that LEPs will improve the nation's economy. But specifically, in a transitional period at a time when financing of small businesses is absolutely crucial, and very time-restricted, quite frankly, how do you feel your Department is going to deal with that transitional period and help to get the working capital to small businesses that they so badly need to ensure the budget strategy works?

Mark Prisk MP: There are two issues there. I think the first one is making the transition from RDAs to LEPs orderly and we are very much focused on that. I want to put on record my thanks to the RDA leadership, in difficult circumstances for them on a personal note, to be willing and able to work with us to manage this transition. It is several thousand contracts, it is nine different agencies, and the existing single regional budget is five different Government Departments; it is a complex process. What we have tried to do is to establish a clear transition order, and we will be setting out more about that in the White Paper, so that people can see the steps that we are taking and also make sure that they can see what is happening between the Government Departments and the RDAs themselves, enabling us then to discuss with LEPs what they wish to take on and to then take that second step.

You raise the broader issue about finance to small businesses and this is where I think it is important to distinguish between local priorities and national priorities. The national side to things is important because access to finance is something that affects every small business, whether you are in an area that is in difficulties or not. That is why we feel this is an area that Government should lead at the centre rather than something that is led at a sub-national level; that is why the Government have been making very concerted efforts, working with the banks, to make sure that access to finance is delivered. I think this is where it is important to distinguish what I call the national strategic interest, which Government need to lead on, and the local priorities, which local partnerships are best able to deliver.

Q199   Mr Binley: I am most grateful. I understand your answer, but I will still say that, at this very moment, businesses are in serious trouble. We had some more bad news this morning. Access to working capital is now absolutely vital and all the structure you put in place thereafter is not going to help people who go to the wall now. I understand it is Treasury, I understand your difficulties, but I know you to be a very forthright and doughty defender of business, so I wonder whether you could give us any hints of what might be coming within the next three or four weeks, well before LEPs get into play, that might help in that situation.

Mark Prisk MP: There are two issues there. One is what we are doing about access to finance, and yesterday I chaired the first Small Business Economic Forum, which is dealing expressly with that issue with the banks and the small business organisations. You are absolutely right—you know me reasonably well in that context—that I want to make sure that access to finance, particularly around working capital, is delivered, and that pressure is there. However, that is a national question that is not necessarily to do with the structure of government agencies.

Philip Rycroft: May I just add to that in terms of the national picture? As the Minister has said, access to finance is absolutely critical across the piece and that is why the Government published the Business Finance Green Paper some weeks ago. We are due a response to that over the next two or three weeks, and clearly what happens tomorrow will be relevant to the Government's interventions in this space. It is also worth emphasising the work of the Bank Taskforce, in response to a lot of the discussions that the Government have been having with the banks, which among other things introduced the new £1.5 billion equity fund for growth businesses. It does not address the whole of the space but it is a very useful addition where we knew there was a big gap in that market.

Q200   Chair: Can I just follow up this issue of finance? You say quite rightly that there are two distinct issues. There are the funding issues, inevitably, because of the much-advertised public sector deficit and funding restrictions that are going to take place, and could have taken place under whatever structure we had. Secondly, there is the restructuring issue, but it is not quite true to say they are unconnected. You have a progressive reduction in finance being disbursed by the RDAs at the same time as the RGF is being set up. As I see it, this approach has been taken without detailed consideration of existing financial support arrangements for businesses in areas that may not fit so comfortably with the new funding regime. For instance, I have had a company approach me that has a progressive stage of financial support over the next three years through the RDA and because of the new approach is unclear whether it will get funding, and therefore whether it should continue with its investment over the next two or three years. Would a better approach not have been to start with existing contractual obligations and then set up a funding stream like the RGF subsequently, or at least bearing in mind those existing financial obligations?

Mark Prisk MP: The difficulty with this is that when you want to create a new organisation, if you do not start from a fresh piece of paper there is a whole series of live contracts, and that would be the case at any point in the economic cycle. There is no neat point to do it. I entirely agree with you that, certainly from a personal point of view in trying to manage this, it is a complex matter, but I would not accept that therefore we should solely focus on new contracts and then try to row backwards. I think you have to give clarity both to the existing organisations and also about what the new organisations are going to do, and there needs to be a clear point to that. As we have said, the intention is to wind down the RDAs so they complete their work no later than March 2012, and therefore we will be able to wind up and establish the LEPs over that period so they are fully operating from the spring of that year.

I think it has to be a transition. It is not going to be neat from a central point of view. The key thing, which we are very much focused on, is doing our level best to make sure that among those many contracts and obligations, and assets and liabilities, we are very carefully focused on not dropping too many balls. Chairman, I cannot guarantee to you that I will not drop any. I would love to do that, but I suspect we will. It is very complex; there are several thousand contractual relationships involved, but we are doing our best. I would also say, as I said to other Members before, that I am always very much open to talking to Members when something comes to their attention. We cannot save absolutely everything because inevitably there will be some things where the viability of the project has changed because the economy has changed. Something that may have been signed up three years ago, at the beginning of 2008, may now look more questionable. It is difficult, but I hope that we can work our way through, and I am confident that we will.

Chair: You show a becoming modesty, Minister.

Mark Prisk MP: I am aware that this is the beginning of the process, and I am also aware that in this modern age what one says now will be re-presented in due course.

Q201   Chair: I would just come back to the central point. I think there has been clarity in terms of funding for the RDAs. Where there has not been clarity is the impact upon the individual investment plans of companies being funded by the RDAs, and that inevitably has caused doubt and uncertainty at a time when nationally the country could do without it.

Nadhim Zahawi: I just wanted to take you back to what you just said about the White Paper setting out the process step by step. We have taken evidence from a number of people and organisations, and essentially the common thread has been that some form of regional co-ordination or collaboration is necessary in certain geographies. For example, in the West Midlands or in the North, where there are clusters of automotive manufacturing and nuclear. Are you still willing to allow collaboration or co-ordination where demand exists, and how will you determine where that can happen? Some of the evidence has said that they would prefer it to be evolutionary rather than directed from your Department. I would just really love to hear your views on that.

Mark Prisk MP: Our view is that we have been very encouraged by the 58 positive applications that have come forward, and we are working our way through those. We have also noted that in many of them people have said what they want to do in their areas, but they are talking very closely with other colleagues in their neighbouring areas because there may be an individual project—a motorway improvement or a railway issue—where they will want to come together on an ad hoc basis in order to take a strategic view. Our view is that under this new more localist model, they do not need our permission. I recall—this is partly the danger of me being a chartered surveyor and going back to my days as an urban planner—the days of SERPLAN in which the home counties, as they were then, came together on key transport projects that were of shared mutual interest. They did that on an ad hoc basis. They presented that to Government as a group and then they would re-form as they needed to or form if they did not need to. Our view is that if a group of LEPs wish to form a forum or a strategic team on a particular project, we have absolutely no prejudice against that, but they do not need to come to us for permission to do that. I think that is an important thing because then what will happen is they will look at where the strategic opportunities lie, and they will actually focus on those rather than necessarily on another bureaucracy that has a permanent secretariat, and we start going down a similar path.

Q202   Nadhim Zahawi: So you are not going to be prescriptive? You will allow it to evolve?

Mark Prisk MP: Yes.

Q203   Nadhim Zahawi: Just one more question before I hand over to Jack. Will the public bodies or localism Bills contain enabling clauses granting the newly formed regional bodies the legal powers that they would need, for example, to bid for European matching funding?

Mark Prisk MP: Do you mean the LEPs or are you thinking of a sort of cross-LEP LEP or a regional LEP?

Nadhim Zahawi: Either.

Mark Prisk MP: Okay. What is the legal status? Clearly an LEP will need to have a legal personality—I think that is the appropriate phrase. Again we are not prescriptive about what that will be because many areas already have a development corporation or company that is a side adjunct and they want to use that vehicle because they have existing assets. Rather than create additional legal and accountancy fees, our view is that we do not need to prescribe the precise nature of the legal personality, but clearly if they are going to take on assets or contracts they need to have one. So that would be our view. We do not need to pass legislation about that. Of course we will need to have legislation elements in order to complete the wind-up of the RDAs, and that willpredominantly be part of the Public Bodies Bill. In terms of the need for additional legislation for the creation of LEPs, we do not believe we will need additional statutory powers.

Q204   Jack Dromey: Minister, the evidence given by the organisations representing the private sector has been unmistakable. The CBI, Engineering Employers Federation and Federation of Small Businesses are all saying with one voice that in those regions where there is a powerful argument, there should be a regional co-ordinating mechanism. The evidence has been consistently focusing on the West Midlands, the North West, North East and Yorkshire. In the West Midlands, Business Voice West Midlands has been absolutely clear about this. You have said that if the LEPs choose to have a regional coordinating mechanism then they can do so. What happens if the LEPs do not agree to do that?

Mark Prisk MP: If the partners do not agree they cannot progress.

Q205   Jack Dromey: In which case, given that the approach of Government has been to say that this should be business-driven in partnership with the local authorities, the unmistakable voice of business is that damage would be done to the project we all agree with—rebalancing the economy and growing the private sector. Is that something you are content to allow to happen?

Mark Prisk MP: No, I think that is a nice way of trying to put it. I should, by the way, congratulate you on your new position on the Front Bench and I look forward to debates, I am sure, in that context. What I would say to you if I may is that we get a variety of business views. The national CBI will often have a particular view, their regional bodies will have slightly different views, and local branches may have other views. Let us say that in your area of the West Midlands there is an overwhelming view of the business community that they wish to form a forum to bring together the different LEPs; it is up to them to work with the partnership. If they cannot agree it is not for us to step in and say, "Thou shalt do that."

Q206   Jack Dromey: Can I press you on this? If I take a very topical example, the motor-manufacturing cluster employs 150,000 in the Midlands. When it came to the decision made by Jaguar Land Rover last week, a very significant factor was the power of that motor-manufacturing cluster in terms of what was available to them: machine tool companies, the component companies, research and development, and all the way along to the games industry in the Midlands. It was a very significant factor. What the business community are saying is, had it not been for the work of Advantage West Midlands managing shocks to the system on the one hand—diversifying the supply chain between 2000 and 2005 in the case of Rover—and galvanising that motor-manufacturing cluster on the other hand, that motor-manufacturing cluster would be nowhere near as robust as it is now. That in turn was key to the major decision made by Jaguar Land Rover. What you do centrally is to wash your hands of responsibility and say, "It is down to the LEPs to decide," despite what the business community are saying. You are ignoring the clear voice of business.

Mark Prisk MP: No. Let me explain. First of all, as you well know, the Automotive Council, nationally, is a very important and new tool; one that the last Government instituted and which we have strongly endorsed. It is a good idea and it works well, particularly around the supply chain issues. Of course, as you also know, while there are important geographical elements there is also a national element. Working on the technology road map and particularly the supply chain, so that we manage to make sure it does not hollow out, is a very important part of national Government priority. At local level, the argument you have put forward is very strong, and I would be amazed if you said to me that the overwhelming view of the locally elected individuals—from their authorities, the universities, the other partners—would turn a deaf ear to that and be completely unwilling to engage in that process. So we will stand by. I do not think it is for us to force it on local partners, but I would be amazed if there were not some sort of forum if that is the view of businesses in that part of the country.

Q207   Jack Dromey: The problem is that the LEPs cannot agree with one another right now, let alone agree to that kind of strategic focus. May I ask just one final question? Are the Government speaking with one voice, because there appear to be distinctly different messages coming out of BIS and CLG? BIS on the one hand recognises the power of the business argument for that regional focus where appropriate, and CLG on the other hand is saying, "It does not matter what the private sector say to us; if the LEPs do not agree then that's that."

Mark Prisk MP: No, I do not think there is a difference of opinion at all. I work very closely with my colleagues in CLG, my officials work very closely with their opposite numbers in CLG, and indeed we are working with other Departments as well. I am well aware there are reported remarks or whatever, but I have learned not to necessarily believe everything I read in the newspapers.

Q208   Jack Dromey: So you are not a member of the Anne Boleyn tendency?

Mark Prisk MP: I am not going to make any historical reference in that context.

Q209   Chair: Nadhim, do you wish to come back on any of your points?

Nadhim Zahawi: No I think they have been pretty well covered.

Q210   Margot James: I want to move on to the LEP bids that you have received so far, 58 in total. There have been reports that some have been very well received indeed and are fit for approval more or less straight away. Five were described in the press as "absolute stonkers"—I am not quite sure where that came from. Can you give us an idea roughly how many are ready for approval, and also can you give us an idea of what has particularly impressed you within the bids you have received and on what basis you are evaluating one bid against another?

Mark Prisk MP: I think it is important that when we clear the LEP applications for proceeding to the next stage we talk to them first and we set that list out in its entirety. That will be something we will be publishing shortly, and if you will forgive me I am not going to mention a name A or a name B, because I think that that is unfair on those and others. What we are trying to do is to assess them on the basis of what the support from business is. That is a very important criterion. How deep is that? How broad is that? Is the economic geography coherent? What is the nature of the local authority support, and does this application add real value and ambition in terms of bringing something that would deliver value over and above that which would otherwise occur? Is there something really strong about the way in which they are approaching what they are doing, something that adds to the value, rather than just putting three or four organisations together and coming up with a similar number? Does two and two equal five? That is our remit.

We have been very encouraged by the range, and indeed some of the original thinking behind a number of the applications. I think also what is interesting is looking at some of the principal city areas. It is notable that most of our leading city areas have brought forward applications that relate to that geography, and that I suspect reflects their view. I must be careful in not going too far because people start reading the wrong signals in that sense. We are very close to being able to allow some of the partnership applications to move forward to the next step. The purpose of that will then be for us to look in more detail at their governance, the functions they have asked to undertake. With regard to those who perhaps have not initially succeeded against those criteria, we are talking to them about how we can help them and what steps they need to take to strengthen what they have suggested. So that is where we are at the moment.

Q211   Margot James: How many LEPs do you feel will be approved in the end?

Mark Prisk MP: I have no intention of guessing a number. Although we are quite rightly not trying to look at it from the centre, what matters is having the number of LEPs that meet those criteria that will make a difference to improving their local economy. I do not mind how many that is. What I mind is whether they are each going to be able to make that difference. Are they going to make their local markets work? Are they going to make their local economies better? Are they going to free enterprise as individual organisations? That is my test rather than trying to fit it so there are X number or Y number. I just need to be careful—perhaps there is a natural enthusiasm of wanting to say, "We must have X or Y," or whatever. This is where we have to have the discipline just to make sure the merit of each partnership is the key, rather than a number that we have decided centrally.

Q212   Margot James: Sorry, I wasn't trying to push you for a precise number, more a range, because some of the witnesses we have seen in recent meetings have all got the message that 59 is too many and that Government want to see a much-reduced number going forward. So although I am not pressing you for a precise number, I wondered if you could give us a sense of the range or the size—obviously there might be some outliers—of population that most LEPs might cover.

Mark Prisk MP: The criteria I have given you—the strength of the business engagement, the coherence of the economic geography, local authority support and that ability to add value—are the benchmarks we are working against. There is a huge variety. If you are trying to deal with, say, Lincolnshire but you are also trying to deal with the Leeds area and look at their comparative merits, you have to be careful not to be too prescriptive because the danger then is you are trying to judge the economic priorities of what matters in a rural area like Lincolnshire directly against what matters in a very urban area, and they are not the same. So it is trying to keep a benchmark, if you like—in other words, things they need to get through—rather than defining what they need to achieve. We are being deliberately less prescriptive, and I appreciate that means at this moment you may feel that is not as clear as you would like it to be. I understand that. From a personal point of view it would be far easier if I was able to say, "17 rules and that's what you do." However, I think this benchmark is a better approach so we get that diversity which reflects the real needs of local economies.

Q213   Chair: I think the press reports have said five, and I quote, "are absolute stonkers". I think that is a compliment or could it be a misprint?

Mark Prisk MP: I will leave you to judge that if I may. I am sure you are better able to judge it than I am.

Q214   Mr Binley: Just a very quick one Minister. I was delighted to hear about the fact that you are not setting very tight parameters on this whole business of size of LEPs because as you know there is an application for a LEP based on the county of Northamptonshire. Adding that to your comments about the need to be flexible about working partnerships on a needs basis, are you saying now that a LEP the size of Northamptonshire would not be ruled out of your thinking?

Mark Prisk MP: I think the criteria I set out are pretty clear, and that allows us to judge each partnership on their merit, as you suggest.

Mr Binley: I am very grateful.

Q215   Jack Dromey: You spoke eloquently earlier on about the driving force being localism, but you are proposing to nationalise certain functions, in particular inward investment. The problem about that, Minister, is that the track record of the current national mechanism, UKTI, is clear: £6 in £10 of the money secured through the UKTI goes to the southern swathe of England. Is that not a recipe for the Midlands and the North losing out?

Mark Prisk MP: We have discussed this before and I think it is an important issue. The direction we want to take is to make sure that the UK's competiveness is strengthened. I personally do not believe that having nine RDAs trying to establish sector leadership, on the basis that somehow a business sector is principally solely confined within one RDA, is helpful. That is why we have drawn back to the Business Department for sector leadership, the Automotive Council being a very good example. With UKTI it is important to remember that something like 47% of the value of the projects that have been progressed by UKTI in recent years has gone to the North, when in GVA terms it is about 27%, so I would not necessarily accept the argument you made.

Let me just explain where we want to go with this, because I think this may help. Our view is that, particularly abroad, it is very important that there is a clear single voice in terms of seeking to attract inward investment. We had the nonsense when I was in Shanghai two years ago of discovering that two blocks down from the principal UKTI effort to promote the UK there were entirely separate offices of RDAs, jostling and competing for the same business; it does not make sense. I spoke to two German businesses who said, "Look, we are confused, someone is trying to explain to us why it is that Coventry and Leicester are entirely different areas and they should compete with each other." Of course it comes down to the way the map has been drawn. Abroad, we want to make sure there is a clear, strong, effective voice. That will work most effectively if the roots when dealing with those inquiries are strong and local. So I have asked UKTI to make sure that they bring forward a model that will allow them to have that strength of voice abroad when dealing with incoming inquiries but that is not London-centric. I think that you are entirely right to be anxious to make sure that we do not end up creating something that is solely about one part of the country, and that we have a model that has a single payroll but nevertheless strong local roots in the way in which we deal with those inquiries.

Q216   Jack Dromey: How would that be achieved? If you look at the track record in the West Midlands in terms of inward investment in automotive, in the North West in terms of inward investment in nuclear, and in the North East in terms of inward investment in chemicals and process, the respective RDAs all have a proud record of achievement precisely—your point earlier on, about localism—because they knew their local economy. Now, co-ordination of approach, of course that is right so that people do not trip over one another's feet, but how do you achieve what you stated from Whitehall? Is that not the antithesis of what you said in terms of localism?

Mark Prisk MP: Not at all. I think you can have a national organisation that has strong roots across the whole of England in terms of—

Q217   Jack Dromey: What do 'roots' mean?

Mark Prisk MP: It means having a presence in those localities so that they have knowledge and understanding of their immediate local economies.

Q218   Jack Dromey: What kind of presence?

Mark Prisk MP: I think we are getting ahead of ourselves. I have asked UKTI to bring forward a model. I will look at that model to make sure that I have considered that it has a genuine national spread, and that will be set out in the coming months. They do not have a budget just yet, and they won't have until Wednesday, so my ability to give you the detail on that will be limited, but we will come back on that if we can. However, be very clear: I do understand the importance of having that national framework and that it should not become a London-centric organisation.

Q219   Jack Dromey: One final question, Minister. It is all the more important, is it not, because given the relative robustness of the economy of the South East, and given that in Scotland and Wales there are highly developed, well-focused and well-resourced regional and national development agencies like Scottish Enterprise, it would be very bad news, would it not, for the West Midlands, the North West, the North East, and Yorkshire if they were to lose out.

Mark Prisk MP: It would, but they will not.

Jack Dromey: We will see.

Q220   Chair: Just quickly getting back to the issue of the bids. If the initial bids are not considered up to scratch, is there an option for reconsideration and resubmission, and if so, when would the deadline be?

Mark Prisk MP: We are talking to all of the applicants, and clearly there are one or two we have been talking to about elements that need to change or improve in terms of the criteria I have set out. We will set out who is where in terms of who has been cleared for progress and who has not as a whole, and we are also talking to them about the timetable for that. That will be quite clear very shortly.

Q221   Nadhim Zahawi: Going back to what Jack was just talking about, which was the joined-up thinking that is going to be crucial if we are going to get this right. What will happen if you do have the five stonkers but they have overlap, and you have gaps in the rest of the country where LEPs have been rejected? What will happen then? We will have vacuums in parts of the country. I completely understand that it needs to be an evolutionary process. The RDAs are still going to exist until March 2012—I get that bit; but what will you be able to do from the centre? I guess it would be counter to the strategy of localism to interfere. What will you be able to do if there is overlap and they are all good, or where there are gaps?

Mark Prisk MP: I think the first thing to bear in mind is what I said right at the beginning, which is that there is a national framework for economic development. Business support led from the centre, sector support led from the centre, trade, capital market failures, and also support for innovation. That is all going to be something that Government as a whole are going to take the leadership for.

Q222   Nadhim Zahawi: So the shocks will be done centrally?

Mark Prisk MP: They will be led centrally. Then of course the establishment of the LEPs will be a programme that will allow them to focus on the issues that matter to them locally. It may be things like transport problems, planning problems, infrastructure problems. I think very often the issue for a small local business, or indeed a medium or larger business, is removing some of the barriers—the things that hold businesses back from growing in their locality—which very often are best dealt with at local level. What are the transport priorities for that area? What do they need to make sure that they marry the skills? How do they ensure that regeneration happens in a particular secondary area of the city? Those sorts of things are best dealt with in the local area.

We are progressing with LEPs; the fact that we have had 58 tells me that there is an appetite for this. There will be some squabbles in parts of the country, but my inclination is that once people see that others are progressing and that actually the message from the centre is, "If you can't agree on a partnership then it is not something we can force on you," then I think that those squabbles will start to dissipate and we will see considerable progress. In a way it would have been far easier for any government to have said, "We will dictate on this, and we will drive it and lead it." We are taking a perhaps more difficult path for ourselves in saying to people, "This is your economic area, this is your economy locally, you lead it." So far I have been very encouraged that most areas have really taken up that ball and run with it.

Q223   Nadhim Zahawi: You will be opening yourself up to short-term attack because you will be seen as not doing very much, but what you are suggesting is a nudge process, that is, people will see others progressing, and then the penny will drop that they ought to progress as well. I think it would be unwise to be in pursuit of uniformity because it is not the way the country works or the way the economic regions are in our country, but would you, for example, consider having pathfinders, which is best practice for how these things work, so other areas that are left out will say, "Well actually this is how it is working. Maybe we ought to see how it would work for us"?

Mark Prisk MP: In a funny sense I think what will happen is, that because a number will and have come forward that we will be able to clear to progress straight away, they will make themselves pathfinders; we do not need to have a formal programme around that. I think that is the way it will work. But I think you are right: what we have tried to do is to recognise the considerable variety of economic geography, especially within regions, which often is not in any way reflected in how the RDAs have operated, and say to business and civic leadership, "It's your area. These are the things that you can make a difference on. What do you want to do?" You are right; it does open us up in the short term to being accused of not having a clear national plan. I am quite happy to take the brickbats on that if we get the longer-term progress right, and in four or five years' time a local business in our constituencies looks at their area and thinks, "You know what? It is easier to start up a business. It is easier to grow my business. I feel there is a partnership here between civic and business leaders that understands my economy and that I feel is accountable to me." That will be good progress.

Q224   Nadhim Zahawi: Are you finding it hard with local political leaderships to think beyond political boundaries and to think about economic boundaries?

Mark Prisk MP: I think it has varied. Some people have been convinced that we have a secret plan hidden under the table, and indeed have asked repeatedly if we would only tell them what the secret plan was. I have to tell them: there is no secret plan. There is no magic set of hidden rules that we are not telling them about. I do not blame them because after a good 10 or 15 years of centralised control, someone actually treats them as a grown-up and says, "You choose, it is your decision," and some people have found that very difficult to cope with.

Q225   Chair: What you are saying is very interesting. It does seem to be that there is a grey area in the engagement between Government and the LEPs. In order for the Government to get the LEPs to deliver certain services there has to be a legal recognition of what is a particular LEP in an area. On the other hand, you have said that in effect they can more or less go it alone. If there is no statutory recognition of a particular LEP, what is there to stop any particular group of business organisations, possibly in conjunction with a particular local authority, saying, "We're a LEP. We're separate. We want part of the action." How would the Government respond to that?

Mark Prisk MP: A LEP needs to have a legal personality in order to own assets and contracts and to operate in that way. A number of them have asked to undertake certain functions. Where Government Departments engage them and say, "Yes, we would like to engage with you in delivering those functions," what will then happen is that the Department will only do that if it is with a partnership that has been cleared to progress. That is where the mechanism lies. It, of course, allows those partnerships to also undertake their own functions and to set their own priorities. It allows Government to be able to engage with them on a contract-by-contract basis.

Q226   Chair: So at some stage—I think I am interpreting this correctly—the Government would give a stamp of approval for a particular structure in an area and say, "Yes, that is a LEP that we will deal with."

Mark Prisk MP: The intention is that we clear the LEPs to be able to progress on the basis of the criteria that I have set out. To go back to Mr Dromey's discussion around UKTI, it may well be that in a major city the delivery of trade and investment is something that the UKTI wishes to engage in with that particular city LEP. They will enter into discussions because it is a LEP that we recognise so we will be able to enter into those discussions directly. It is a different mechanism from what we have had in the past, where you have a single budget into which five Departments put their money and then it is spent on a much more discretionary basis and, I have to say, a more difficult to track and measure basis. This is a more direct approach and I think that will deliver good value for money.

Q227   Chair: I am sorry to labour the point. We are coming on later to the issue of accountability, but at the end of the day if you have an engagement between the Government or Government organisations and an individual local organisation there has to be some sort of governmental definition of the unit they are dealing with. I am still not quite clear whether this is the case.

Mark Prisk MP: I would say it is slightly different, but I do not know whether it is something my officials want to clarify in technical terms. What I would say to you is that where we look, for example, at business support, BIS might be looking at the delivery of how that might deliver it. It would then look at the partnerships that have progressed and say that we would like to engage with these. We will then enter into a relationship with them as we would with anyone else. But we would only do so with those partnerships. [Interruption.] That is obviously Mr Binley's LEP calling him now. That is the important change.

Mr Binley: You handled that test well I must say.

Q228   Mr Ward: First of all, good morning.

Just to sum up a bit if we can. There seems to be a trade-off between a lack of prescription and flexibility, and certainty, so we are moving into a period of uncertainty in terms of what these things are. That has come across in a number of presentations. There needs to be some solid ground. Can you just sum up what the solid ground is on which this will be based?

Mark Prisk MP: Do you mean functionally, in terms of who does what?

Q229   Mr Ward: The whole caboodle really. When we are talking about these things, when we are discussing what should happen, there is a lack of clear criteria. For the reasons that you explained, you want people to form their own judgments on a local basis. What is the solid ground that people can stand on when they are putting together a notion of what these things will be?

Mark Prisk MP: The purpose of the LEP, as we have said, is to enable them to establish their local economic priorities and then to deliver on those, especially in areas like transport, planning, infrastructure, regeneration—including housing—in that area, and indeed obviously skills. Looking at the applications, people have put forward different things depending on what their priority is. So once cleared, they will then talk with the relevant Government Departments, of which there are several, to engage with them in forming the relationship so they can then deliver on those with those Departments where they wish to. That will become a mechanism to deliver specific things in their area related to their local priority. Now it is complex looking at it from the centre simply because different areas will ask to do different things. We have tried not to say, "You will do X, Y and Z," on those areas. What we have done is to bring back to the centre a number of national functions that we think should be dealt with on a consistent basis and not on a sub-regional basis.

Q230   Mr Ward: So the solid ground is what works?

Mark Prisk MP: That is a pretty good basis for most things, yes.

Q231   Chair: What would happen if, within a LEP, a group decided in effect they wanted to declare UDI and go their own way because they did not agree with how it was going within the wider organisation? I can think of a potential example fairly close to home. Would you let them go ahead, a self-declared LEP?

Mark Prisk MP: We have invited people to bring forward their proposals. They are not mandatory; we are not dictating, "Thou shalt have a LEP whether you want one or not." The fact that we have had 58 suggests to me that most people do, both the business and the civic community. There are areas where the civic community may have come forward and there have been complaints from the business community that they have not been engaged, and the business community now want to take a front step on that. Fine, I do not have a problem with that. I think what is happening is people are suddenly realising that the age of centralisation, in terms of we tell them what they ought to have, has ended. So inevitably there has been a period of realisation about what this means and how this works. Some have grasped it quickly; others are taking longer to do so. That is fair enough, I understand that. What I envisage is there will be a diverse range of partnerships undertaking functions that matter to them and not necessarily to me. Government will be engaged with them on a function-by-function basis while providing the national leadership on the strategic economic priorities for the UK as a whole. So it is a little more complex, but actually it is not dissimilar in some ways to the period before we had the RDAs.

Q232   Chair: Could I just clarify? Are you saying that if, for instance, a business group were dissatisfied with the LEP and wanted to go it alone, the Government would deal with them as if they were a LEP?

Mark Prisk MP: The partnership has to have a balance of public and private. Let us say, in a hypothetical sense, that a civic side—the local authorities—simply cannot agree and the business community starts to take the leadership in putting a bid together, we will look at that. However, in the end they have to meet the same criterion, which is: is the board that they have put forward to us a genuine partnership of civic and business? What it does is to put the onus to sort this out back on the local area. The tricky part from our point of view is if we try to mandate a partnership it would not work anyway, because if the partners cannot agree on forming the partnership they certainly won't be able to maintain it. We have to be realistic in recognising that if these are going to be genuine partnerships they have to be bottom up. That does mean that there will be a short period when there are discussions and in some cases squabbles. I think you will find that the vast majority will settle those.

Q233   Chair: That may or may not be correct. I accept the point that one of the criteria is that there must be equal representation from the business and the local government community, and without that it would not be acceptable. However, from a business perspective, if they could not get a satisfactory response from the local government side, they could then be effectively precluded from any of the advantages of operating as a LEP. Would that be correct?

Mark Prisk MP: If the local partners cannot agree, we cannot form a partnership. So the onus does rest there and I think that is the right way to deal with it.

Q234   Margot James: I wanted to probe your view on the role of skills within LEPs. Most of the LEP proposals have indicated that they see themselves as being involved in setting skills requirements locally. Do you think that skills should be a part of every LEPs remit?

Mark Prisk MP: No, I do not think that I should say what every partnership should do, that would be my starting point. You are right; some have indicated that for them skills would be important. As you know we are looking to free local colleges and training organisations so that they can address what local businesses and local learners want to do more than they have been able to in the past. I think this sits very neatly alongside LEPs because then what they will be able to do is work together in order to forge the priorities and skills and training that the local colleges, training organisations, LEP members and so on wish to form, rather than what we set at the centre. I think the two sit quite neatly next door to each other.

Q235   Margot James: You have mentioned FE colleges; they are often large employers and significant businesses in their own right in any given area. Do you see them as being lead players in the delivery of the skills agenda and would you envisage FE colleges as being at the heart of most LEPs or any LEP where skills have been identified as being a key issue for that LEP? Could you see an FE college being a likely player within the organisation of the LEP?

Mark Prisk MP: I think that there is every chance that that will be the case. Indeed it would be surprising if an LEP set out an ambition that specifically included improving skills and then failed to engage with the college in any way, so I would expect them to do that. Just to broaden it very slightly if I may, in those areas where skills are important, I would hope that the civic side of the leadership would incorporate not just local authorities but obviously FE colleges, universities and of course the trade union movement as well, because they are all part of that local economy.

Q236   Mr Ward: On timing issues, I am yearning for a bit of prescription. There needs to be some certainty in terms of what is going to happen and when it is going to happen. I just wonder if you could take us through the timetable, the White Paper and when these things will come into operation. Will they all come in at the same time? Will they be staggered? Just some idea of the process from here to there.

Mark Prisk MP: We have received the 58 applications. We are dealing with those and are very close to completing our full response to those. We have the White Paper that deals not just with LEPs, but with the other topics I mentioned—the Regional Growth Fund and other related issues as well. Those will then be set out in the next few weeks. I do not know whether my officials want to go into a little more technical detail about the process.

Philip Rycroft: In some respects the timing of this discussion is obviously before two rather important events: the spending review itself, which in terms of setting the forward financial framework is going to be very important, and then there is the White Paper itself. Both those two, in a sense, are pretty key milestones in setting out the forward timeline on this. We are working with the RDAs very closely on their transition closure plans and, as has been mentioned already, with a target date for the end of March 2012, which gives us an end point on that. The key challenge over the next few weeks is going to be how we manage through that process: the development of the LEP programme, the future of the national level functions, which are again critically dependent on spending review outcomes. Today is not the best time in a sense to give all the precise dates on that, but we will have the material and the milestones in place to be able to get that timetable running over the next three or four weeks.

Q237   Mr Ward: Then 2012 is all up and running, but will it be all? Will it be some of them? Will some be still halfway through?

Mark Prisk MP: The overall 2012 limit is the backstop, which is the point at which the RDA wind-down should be 99% complete. There may be one or two legal issues around. You may have the legal entity that may still exist, but it may be a shadow organisation. Fundamentally, the new LEP environment will be fully up and running from that spring. You will see it phased, not least because some are ready to go and have ambitions, and as Committee members have rightly identified there are pressing priorities, so we do not want to hold it back. What we are trying to do is make it an orderly process that is prompt but does not get ahead of itself. It is a tricky balance and I would not pretend to you that it is anything else. We are trying to make sure that it is an orderly progress so we know where we are, we have the asset register, we are talking to the individuals, we know how we are going to make the transition, we know who is going to be doing what, and then work towards that over the coming 18 months.

Q238   Rachel Reeves: Welcome to you, Minister. You and your civil servants have said that it is difficult at the moment to be entirely clear because we have not yet had the comprehensive spending review. I think the same could go for the local authorities who have had to come in and put in bids when they are very uncertain about what funding the LEPs might have available, and also in the wider context of the huge cuts to local authority budgets. I was wondering whether you could comment on that.

Two people in front of us during the course of this inquiry were Councillor David Sparks and John Cridland of the CBI. David Sparks said: "Quite frankly, what I would have done is to have had a more extensive consultation exercise saying that it is policy to abolish RDAs and then have a consultation", and that "RDAs needed to be reviewed anyway for their own good, but just abolishing things French revolution-style is not always a good idea." Then John Cridland of the CBI said, "It was unfortunate that LEPs were requested before a White Paper was issued, because we have been doing things in something of a fog." I was wondering whether you could comment on those comments and whether you think there is any merit to them.

Mark Prisk MP: I am not quite sure about the French revolution; I think we have moved from Anne Boleyn to Marie Antoinette, but we will put that to one side. I think the CBI, naturally, have expressed their wish to have absolute clarity and certainty. We have explained to them that many of the areas where they want to see that—things like inward investment, business support, sector leadership and so on—are going to get precisely that. So quite naturally they want to have this relatively prescriptive, and we have spelt out why they won't be having it as prescriptively on the ground. I think there is an important issue here, which is that democratic accountability is an important issue that needs to sit alongside the importance of growth. I am sure that the CBI will recognise that, but we have a very good dialogue with them and I understand where they are coming from.

In terms of local authorities and the uncertainty that you described, again we are trying to make sure that what local authorities have overwhelmingly asked for in recent years—that we give them greater freedom, different powers, more powers, the ability to set their own priorities—is what we are going to deliver to them. Certainly most local authority leaders that I speak to, while they would recognise that everyone would always love to feel that somehow there is a clearer plan, recognise that the great opportunity here is that they finally will be able to be an integral part of real economic partnerships on the ground, and for the most part they have very much welcomed that.

Q239   Chair: Just to take the Marie Antoinette metaphor a little further, you appreciate that our role will not be to play that of the tricoteuses—knitting while our regional development policy goes to the guillotine. Obviously we will be making some fairly positive and robust recommendations on this. I believe David Ward wanted to ask something about the transition period.

Mr Ward: I think there are a whole bundle of issues. It keeps coming back to, or I do anyway, the certainty and uncertainty. I am sure it is a worrying time for a lot of the staff within the RDAs—some are disappearing and that was always the plan. It is that transition period I think and how in particular we have talked in the past about the assets of the RDAs, and indeed the liabilities, but it has been pointed out that it is not just physical assets that the RDAs have; it is knowledge, skills and expertise that we could be in danger of losing during the transition period. Do you have some thoughts on how we get from here to there without losing a lot of the good aspects of the RDAs?

Mark Prisk MP: I am very alert to the fact that within the RDAs there are people who have experience and knowledge that we very much value. I am not in the business of suggesting that is not the case. We are trying to make sure that as we manage the transition we think about the assets physical, as you rightly describe, but also the know-how and the knowledge that is there as well.

Philip Rycroft: Obviously we will be working very closely with the RDAs on how we manage this process. If I can just echo what the Minister said earlier on in terms of paying tribute to the commitment of the chief executives and the chairs to make sure that this is well managed and is an orderly process. There are a number of headlines in that which you have identified. There is handling of the assets and the liabilities. Earlier on, members touched on the tail of commitments—where there are legal commitments the RDAs need to see out. There is the whole question of how we manage the process of closures—so the retention of key staff—through all of that. Then alongside that there is the knowledge and skills point. How do we make sure that we do not lose that knowledge? How do we capture that? How do we make sure it is available for successor organisations? All of these things are advancing week by week. I think we are in a better place than we were six or seven weeks ago, and I can tell you that the dialogue with the RDAs is very intense around all of this and they are very clear that they will each need to develop a very clear transition and closure plan over the next few weeks.

Q240   Jack Dromey: This is no way to manage the transition is it? John Cridland of the CBI put it very well when he said, "No good businessman or woman would take a current product off the shelf until they were ready to replace that product with the new product." The difficulty is that you have a period of the best part of two years of transition in circumstances where, first, you are significantly reducing the moneys available to the RDAs; secondly, the RGF is not yet established; and thirdly, there is a haemorrhage of talent already under way. Can I first ask you to comment on that? Then I want to come on to what practical steps you are taking to address that.

Mark Prisk MP: The full details of the RGF will be set out very shortly in the White Paper and that will be progressing promptly. We have already been able to go out in consultation and get responses to that, so that is progressing. The movement from the RDAs to the LEPs is complex because it is about dealing with a vast range of contracts and assets and liabilities and people. Even if we were moving to nine identical organisations it would be difficult. I am not pretending that it is easy. I think this is the right point to do it because we have moved out of recession, we are moving into what I trust and hope will be a period of sustained growth; that is the picture that is there. I think that this point in the economic cycle is probably the right moment to do it.

I think I would also say to you that I understand that the CBI will be anxious about this: fine. Anyone engaged in any transition process will be concerned to make sure that it works, but judge it when it is settled and when it has progressed. I think when you see the new LEPs coming forward and we start focusing on getting them up and running, the natural anxieties about what it means, how it will work, and what it looks like from the centre will actually start to dissipate. I understand the scepticism, which is perfectly natural; whenever you make big changes there is always a worry that somehow the new arrangements will not work, and that although the old arrangements were not perfect maybe we could have reformed them; we felt that wasn't the case. Either we spend a year to 18 months examining and consulting, or we make a decision. We made that decision and we will get on with it as promptly as we can. That is the aim.

Q241   Jack Dromey: This comes just at the time when something unites all parties in Parliament—rebalancing the economy, growing the private sector. Yesterday we had a welcome announcement in relation to the nuclear industry. We hear from Manchester in their evidence that there are real problems in terms of retaining the necessary skills in the North West to take full advantage of that. There is the background of last week's welcome announcement by Jaguar Land Rover, and the opportunity to build on that in terms of a renaissance of motor manufacturing, building on what is already a strong base in the West Midlands. They too, in the West Midlands, are losing skills. In practical terms, what are you doing to avoid that loss of key skills at a key time?

Mark Prisk MP: I am working, as I have since the day I started this job, closely with the management and senior leadership of people like Jaguar Land Rover, as you know, to make sure that they understand that this Government are serious about their business, and indeed about their sector. We are strengthening the sector leadership because major multinationals, such as the one you have just described, look to see whether the Government of that country are serious about key investment. If they do not see Ministers, and they do not have active engagement with Ministers, then whatever may be good on the ground will be a problem. That is why I have been working very strongly to make sure that we strengthen our sector teams in the Business Department and that we make sure that we have a better understanding, whether it is automotive, aerospace, pharmaceutical or whatever, so we are better able to do that. It is about Ministers forming strong relationships with the senior management of those multinationals, not just when there is a contract to sign or a deal to be done, but building relationships. I often feel that we as a country can learn something from other politicians from other countries where Ministers are engaged at a much earlier stage in building relationships with those multinationals. Like you, I very much welcome what Jaguar Land Rover have been saying both to us and to people locally over the last six months. There are very encouraging signs on that. But it needs the national engagement as much as it does what happens on the ground. The two are very important.

Q242   Jack Dromey: I totally agree about the importance of that national engagement and welcome the national engagement that there has been. We will be looking for that to be translated into forms of support at the next stages. Forgive me if I press you further on this, because Mr Rycroft, forgive me if I say this, I think effectively gave the game away. This is more about the closure plan than a transition plan. What practical steps are you taking to ensure that vital skills and knowledge in key RDAs, covering key economies and sectors within key economies, are preserved during the period of transition?

Mark Prisk MP: We have worked with each of the RDAs to make sure we know exactly what they are doing, where their strengths, weaknesses, assets and liabilities lie— both people and property. What we are working with them on is a specific and worked-through transition programme for each of them and together, so that we can see not only what they have individually, but where the overlaps often lie. What we are looking to then do is feed those into our approach, both in terms of things like sector leadership, inward investment, trade and business support, so that we are able to make that transition clearly.

Some things will have a clear national strategic importance. That is where central Government need to step up to the plate, lead that and run that. Other things will be national assets, but we want to work with the local people—the local partnership—because they are well placed and they have the local expertise. So we have to do it on a case-by-case basis. But you are absolutely right and we have a specific programme for each of them. I do not know whether my colleagues want to add anything.

Philip Rycroft: If I may just respond to your point about what I said. I think I chose my words quite carefully as transition and closure because clearly—

Q243   Jack Dromey: It is more closure than transition.

Philip Rycroft: I did not say that. The RDAs clearly are going to close and we have to manage that. It is how within that you get the transition to the new arrangements so that we do not lose assets and knowledge and skills that are important nationally. That is why the process of working this through with the RDAs is so important to manage over the next few months.

Philippa Lloyd: All I was going to say is that there is a specific knowledge management workstream in the whole national transition planning approach to help ensure that we do track and retain the key knowledge where we need to in order to manage the closure and transition, as Philip and the Minister have set out.

Q244   Luciana Berger: If I can just come to a question following on from Jack. We are going to talk a little bit later about EU funding and how that will be secured under new arrangements. If I can use EU funding as an example, in the transition arrangements currently across the UK, where we have RDAs we have specialists that administer funding applications in the ongoing process for EU funding. Can you use that as an example of how you see the current skills and knowledge working when we transition to LEPs?

Mark Prisk MP: Just broadly—I may leave some of the technical details—what I would say to you is that the managing authorities for the different EU programmes under the structural funds will remain the same. What we are looking at is how we can make sure that in this period to the end of 2013—which is when the current range of ERDF programmes, for example, concludes—the remaining period is managed, as it has been in the past, with a central managing authority in Whitehall and then working with the local partners on the ground. We have a specific part of the transition programme that we have talked about that reflects that element of it to make sure that we are looking very carefully at the ERDF stream of funding, which very often comes into different projects in different ways, so that we understand where that is and we make sure that we manage that transition in an orderly fashion.

Philip Rycroft: If I may just add briefly to that. Obviously we have been working very closely with the various Government Departments who lead on the various aspects of work, in this case CLG, as to what sort of skills and capabilities they will need to transfer from the RDA. That is one of the very clear questions that we are working on.

Q245   Luciana Berger: Just to reinforce the point, obviously you are talking about what happens centrally and we know how things work. There is equally expertise in the RDAs currently and it is still unclear how that is going to transition.

Mark Prisk MP: We are working with them now, so they are part of that dialogue we have just described.

Q246   Mr Ward: This is again about the closure programme of the RDAs and their offices. Did you ever really just consider them as something that could be morphed—as transitional vehicles for moving from here to here—rather than create a new organisation? What we have received in a number of presentations is the fact that the RDAs branched out into far too many areas and broadened their remit beyond their original purpose. It could be argued there was a case for contracting back to the original RDAs as they were set up. Was that ever considered as a way forward?

Mark Prisk MP: I think the difficulty is that you go back to the question of what are the benefits of the LEPs: one, to get the economic geography right; two, there is a genuine partnership between the business and civic communities; and three, they are accountable. I think it would have been incredibly difficult, and possibly more confusing, to have tried to do that, because it might work in some areas but not in others and the boundaries were changed. Our view was that it would be better to have a clear decision to actually wind down the RDAs and establish the new LEPs, especially with that very different character, because you are moving from what is essentially a Government non-departmental public body to a local partnership, so they are very different in character. Will some of the outstanding individuals who are currently engaged in economic development working for the RDAs be attracted to some of the LEPs in the future? Quite possibly, but I think what we are trying to make sure is that there is an orderly transition from RDA to LEP, but for us to try to micro-manage that and move from what is essentially a quango to a local partnership would have been possibly more confusing and actually would have probably taken longer.

Q247   Luciana Berger: Minister, you mentioned previously that you are currently doing some work to assess the assets and liabilities and existing commitments of RDAs. Have you assessed the costs of forming LEPs versus the savings from abolishing RDAs?

Mark Prisk MP: The RDAs of course receive funds from five or so different Departments in a single pot and then use their money in a different way. So it is quite difficult to measure that in advance. The view we have taken is that having established the desire to wind the RDAs down and replace them with LEPs, we need to establish that orderly process, get the financial controls into place, and then start to work that through. I do not think at this stage it would be possible to come up with a number, not least because a lot of the contracts engaged are live contracts, and therefore the picture changes on a fairly daily basis.

Q248   Luciana Berger: We have also heard stories of conflicting instructions from BIS on how far the RDAs should be de-committing from, for example, Business Link contracts. Can you comment on that please?

Mark Prisk MP: I am wary of commenting on reports. All I would say is that obviously the RDAs need to manage the contractual arrangements they have. They keep us informed, but what we are not trying to do is micro-manage the details; those are for them to deal with.

Q249   Margot James: I would like to ask about the position of LEPs taking over the funding of mid-stream RDA finance projects because there is going to be an issue of lead-time gap between the formation of the LEPs and the closure of the RDAs. Some RDAs seem to have taken quite swift action to cancel projects mid-stream. Do you regard this as a problem?

Mark Prisk MP: I think again what we have had to do is say that the RDAs have been required, as every part of the public sector has, to deal with in-year savings. Obviously on Wednesday the Chancellor will set out what happens thereafter, so I will not get into that. Clearly those have been challenging numbers for them. Again what we have tried to do—this is partly reflecting the future landscape where localism is important—is not to tell them which bit of their budget they need to retain or reduce, or whatever. So it has to be on an RDA basis, but I do not know whether my officials want to say anything further on the technical side of that.

Philip Rycroft: In terms of managing the commitments, clearly as the Minister has said, we are in an environment where all aspects of public expenditure have been looked at very carefully and the RDAs are not exempt from that. Where there is lower priority activity they have to think very hard about whether to continue that. We have been working with them very closely to get a clear fix on what the future stream, the tail of commitments that they have over next year, and indeed the two or three years beyond, what that picture looks like. That therefore has allowed us to engage in discussions within Government about how we manage that in a spending review context. That is obviously something that is pretty pertinent to tomorrow's announcements.

Q250   Margot James: Are you finding differences between RDAs in where they are finding their efficiency savings from? For example, are you finding that some are finding a greater proportion of their target savings from back office costs or direct employee redundancy savings, versus grants and support for business and the sort of money that is tied up going directly into business? Are you finding differences?

Philip Rycroft: Obviously all parts of Government are looking very hard at the back office admin costs, and we required all RDAs to look hard at their administrative costs. But if you look at the totality of their expenditure through the single pot, that forms a relatively small proportion of the total expenditure. In effect, while all RDAs have had to focus hard on that, and I am sure they will continue to focus hard on that, they have also all had to look very hard at the greater volume that sits in the commitments to the contracts.

Q251   Margot James: One more question if I may, Chair. We have talked about the ERDF situation with regards to expertise and trying to hang on to the knowledge that RDAs have built up. What about ERDF funding that has been granted that is as yet unspent? If I may give an example from my own region, the West Midlands, £234 million of the current schedule of funding from ERDF is unspent, requiring matched funding. The RDAs were the body charged with providing some of that matched funding; they no longer have the money with which to do that. What will happen to that unspent money if they are not allowed to find other sources of matched funding?

Mark Prisk MP: As you know, the Treasury have quite rightly said that, for all parts of Government, commitments cannot be entered into in those circumstances without prior permission beyond the current financial year, which is a perfectly logical thing to do. That has meant that there has been at least some ability to get a handle on that. In terms of existing commitments where it is clear that there is a copper-bottom legal commitment, then obviously that is something we are looking at very closely to make sure that we do not by accident suddenly manage to undermine a project. One of the tricky parts of the old regime that we are dealing with is that a project may have a little bit of public funding, perhaps through an RDA or maybe another public body, a little bit of ERDF and some private funding as well. This is why we are just trying to make sure that we step carefully so that we do not find that one of those elements drops away without us being aware of that in advance. It is difficult.

Q252   Luciana Berger: Can I ask specifically about the RDA assets? We know that RDAs have been asked to submit a list of everything that they have. Two examples in my constituency: Wavertree Technology Park is currently under the auspices of the North West Development Agency, as is the former Littlewoods building, which was due to be two new schools under the Building Schools for the Future programme, and now not going ahead. What is going to happen to those assets? We have heard different and conflicting things. Are they going to be transferred to localities? Will they be under the auspices of LEPs? My fear is, as we have heard, that there is going to be a quick fire sale of those assets. Or are they going to come back into Whitehall?

Mark Prisk MP: It will be quite rightly on a case-by-case basis, depending on the nature of the asset. You have named two examples, but there is a huge variety of different types of assets, and indeed liabilities, on which we have worked with the RDAs to establish a register. Where there is something that clearly has a national strategic role—a major institution that happens to be in an area—clearly if that fits with the functions that I have described, like trade and so on, then we would naturally look at central Government taking a leading role in that area, but we do not rule out that including the local partnership being able to be involved. Other assets will be dealt with on the basis of what the partnership asks for and what the merits are of each case. I am being relatively general, but my official may want to be slightly more technical.

Philip Rycroft: Exactly. I think that everybody recognises that the biggest concern around a fire sale is that it would not be a sensible way of dealing with assets and liabilities. We have to think about these as assets and liabilities and how we manage this as a whole, and how we manage this in a way that leverages the best return for those assets—and turning the liabilities into assets over time—from the point of view of the local areas. This will require a lot of hard work over time, with the LEPs among others, in order to realise best value from that asset and liability portfolio.

Philippa Lloyd: We are establishing principles surrounding the disposal of assets, working very closely with Communities and Local Government and Treasury, and that will provide the underlying basis on which the case-by-case consideration will then proceed. That is what we are working on.

Mark Prisk MP: So the merit will be based on a clear set of principles. I think that is the important point, because clearly you are dealing with lots of very different types of assets so you need to have something that is an objective set of criteria.

Q253   Nadhim Zahawi: Minister, you quite rightly explained the way RDAs were funded by pooling five Departments and taking bits of money, but that this is difficult to measure. How will the LEPs be funded? Will there be additional public funding above the Regional Growth Fund for LEPs?

Mark Prisk MP: Our view is very much that the LEPs have brought forward a range of different requests for things they want to do. The basis of how central Government works with them, and therefore the funding that comes with the delivery of those projects, will be on a project-by-project basis. In terms of value for money, I think you are right in alluding to the problem that we have had with the previous arrangements, which is that the remit has not been that clear and the line of accountability has not been that clear. I think one of the benefits of the LEPs will be that the remit will be much clearer, and the accountability will be much clearer. I think that will be an improvement.

Q254   Nadhim Zahawi: And will the funding be from central Government or from local government?

Mark Prisk MP: Where we engage with a partnership for a function that we wish to do with them in partnership, then clearly if they are delivering something that a Department is looking at, such as business support, we would enter into a relationship with them. That would be a contractual relationship, as you would expect in any other circumstance.

Q255   Nadhim Zahawi: Nadhim Zahawi: So it is on a case-by-case basis?

Mark Prisk MP: Yes.

Q256   Nadhim Zahawi: Would you extend local authority powers to raise money for the LEP operations? Just so one can get some baseline consistency on some of the evidence we have.

Mark Prisk MP: As you are aware, and as all Members are aware, the Communities and Local Government Department has set out their ideas for a bonus around council tax and a bonus around business rates. They are looking at the Tax Increment Finance arrangements. The details of those will be set out in the White Paper. You are quite right: those sit alongside the ability of the LEPs to draw down a range of different tools in economic development, so that they can then apply those resources to the vision that they have identified for their area. Therefore, that will be included, and it will be set out in detail in the White Paper.

Q257   Chair: Can I pick up on this very point? I have just heard reports that the CLG failed to include an item to cover funding for LEPs in their spending review bid. Are you able to clarify that?

Mark Prisk MP: I am not in a position to make a comment on that. I am sorry, Chairman.

Q258   Nadhim Zahawi: Just one final bit. It is completely logical that they come forward with projects that central Government can then look at. Is it only BIS or will CLG and other Departments be able to fund those projects?

Mark Prisk MP: I think, for example, a number of LEPs have come forward with their ideas for specific regeneration programmes, and that is clearly where CLG will want to engage with them. Yes, the opportunity for Whitehall Departments to engage with partnerships is an important element to this.

Q259   Nadhim Zahawi: With pots of money—with funding?

Mark Prisk MP: Yes, with projects they want to deliver that are funded centrally.

Q260   Chair: Could I just make one point? One of the problems as I see it is that if there is not funding for a LEP, those areas that historically have not had a strong business involvement in regeneration will very often, almost by definition, be the areas that are most in need of rebalancing the economy. Unless there is some sort of CLG-funded support for a bid, they are going to lose out. How are you going to counteract this particular problem?

Mark Prisk MP: The first role of the LEP is to establish that vision as to what their economic priorities are. That does not need to be something that is a newly established bureaucracy with additional streams of funding. Then they will want to actually tackle issues around transport, infrastructure, planning, regeneration and skills or whatever. As I have described, that will then come with a different arrangement for funding. In addition to that, of course, local authorities will have new powers, which the CLG are bringing forward, in terms of changes to how they operate and the additional set of tools around TIF and the two incentives I talked about in terms of business rate and council tax bonus. They will have a range of tools available to them, and what they will then be able to do, in the way they wish, is to draw those together and vest those in the partnership working with business, in order to put that forward. It is a different funding model; I fully accept that. But I do not think it necessarily means that some areas will be unable to operate these LEPs without a pot of administrative funding from central Government.

Q261   Chair: I still think it comes back to how they are going to develop the expertise to make, say, applications to the RGF, or draw up transport plans, unless they can draw in additional expertise that, virtually by definition, they do not have at the moment.

Mark Prisk MP: Well I am not sure by definition they don't have that at the moment. What is encouraging about some of the partnership bids we have seen is the way in which both civic and business leaders have identified that they wish to bring both power and resources to that discussion. I would not say that they are without the ability to deal with that. The fact that there are a fair number—I forget the exact number—of applications or expressions of interest in the RGF would suggest that actually they are already quite well placed.

Q262   Mr Ward: I think it is a question of whether it is going to be money in, money out. Where there is a particular agenda, there will be an allocation of funding, whether it is to deal with skills or whether it is to deal with other matters. The money will come in and the money will go out on that. I suppose we are talking about some core funding for the people who are going to put in the bids in the first place. It is that core funding of the activities, which may be very small, but may still be required.

Mark Prisk MP: I think what I would say is, we are wary of going back to a situation where we establish a fund, and the moment we announce that fund it will have already been spent in the minds of the organisations because it will be identified as being capable of doing that. What we want them to do is to focus on the things that make a difference to freeing the local economy. One of the key points about this is that it is about local growth. I would put to you that while funding projects is important, sorting out bureaucracy and red tape, dealing with some of the planning restrictions and freeing the local economy is just as important to local businesses as the size of the grants they offer.

Q263   Nadhim Zahawi: Just so that we are clear, my understanding is that this is a very clever and revolutionary idea to free up local government to be able to raise what I would call the core funding, so that it pays for the expertise that can then bid for projects with Departments or elsewhere.

Mark Prisk MP: Yes. The White Paper will set out the details in terms of the bonus in terms of council tax, the bonus in terms of business rates and the TIF funding. These will provide the bedrock, if you like, that will be there.

Q264   Chair: Can I bring Rachel Reeves in? Particularly on the aspect of EU funding, which partly touches on the issues that Margot James raised earlier.

Q265   Rachel Reeves: I was not going to ask about EU funding, but I was going to ask about the fact that I am still unclear whether the LEPs are going to have core funding. Are they?

Mark Prisk MP: We are looking at the details of what we can and cannot fund, because at the moment of course, we do not have our own departmental budget finalised.

Q266   Rachel Reeves: It is just a bit funny, isn't it, to ask local authorities and businesses to put in bids to set up LEPs with what they are going to achieve and what they are going to do, without them knowing whether they are going to have any funding to be able to do these things. I expect what an LEP can achieve might depend quite crucially not just on what powers they have but what funding they will have as well. One example, which is a bit of a broader issue as well, is around tourism funding. Welcome to Yorkshire, for example, has been very successful. One of the things that all of the LEPs in Yorkshire have put in their bids is that they want to set up a community interest company— called Yorkshire Enterprise Partnership, I believe—that would do some of the regional stuff that the RDA successfully did in the past. That community interest company would need core funding because, for example, in Leeds I believe we are in the process of closing 20 libraries, day care centres etc. I am not sure how local authorities are going to be able to fund things given the cuts that are going on. Is there going to be core funding? You cannot answer that maybe, and yet the LEPs have to put bids in. Then what about these community interest companies, which I guess are critical to the success of LEPs, certainly in my area?

Mark Prisk MP: If you have a successful organisation that has been helping grow the local economy, I would be amazed if the LEPs do not want to participate. In tourism for example, it would be Visit England that will be, if you like, the central body that will be working with local partnerships to develop the new organisations, or indeed working with the established ones. That stream will be there.

In terms of the central funding, I think we have to be careful not to assume that economic development is just about money, or indeed administrative money. Of course there needs to be some funding to enable them to be able to develop what they want to achieve, but for a lot of small businesses, especially in many of the comments, submissions and letters that I have seen, what they really want is a local partnership that understands what is holding them back. Yes, they want something that is able to talk with them and engage with them on things like business support, but they also want something that deals with the issues around planning, infrastructure, the need to regenerate areas and the freeing up of the skills agenda so that they can get the people they actually need and not the people central Government think they ought to have. Those powers and that freeing of the local economy is just as important as how much money is actually put forward.

I cannot give you a specific answer because, as we know, I am speaking just before the comprehensive spending review. What I would say to you is that the amount of central administrative funding for LEPs will not be the determinant as to whether or not these are successful. What will matter is whether they have the vision, the partnership, the geography and the ability to deliver. Funds come into that, but it is also about their ability to recognise the need to remove the barriers for small businesses. That is what SMEs say to me.

Q267   Rachel Reeves: When I was in business I would have found it very hard to put in a submission to run something if I had no idea of whether there would be any funding to enable me to run it.

Mark Prisk MP: Well, when I was in business, I think what I found was important was that when you are looking to put proposals forward you are clear about what your marketing plan is. I have been really encouraged by the 58 proposals that we have received, because there is a very high quality of ambition. I think that is very encouraging.

Q268   Chair: You have mentioned, quite rightly, high quality of ambition, but let us look at the reality of the situation. You have a LEP half comprised of representatives from the business community—businesses that in the current economic climate may be really struggling and not able to free up either financial or personnel resources to make major contributions to LEP bids. In the other half, you have local authorities that at the moment are rigorously going through their budgets in order to see how best they can maintain their statutory obligation, and in themselves, are unlikely to be able to devote any major resources to complicated bids. In addition, you have EU bids, which we know are highly specialised and complex and require a degree of expertise in order to be successful. Similarly, major projects, particularly transport projects, all require specialists with a high degree of expertise, often quite expensive, and yet you have two sides of this LEP equation that are unlikely to be able to devote the resources to putting in the sort of bids that are necessary. How seriously are you going to develop access to EU funding and major projects on the basis that appears to be emerging at the moment?

Mark Prisk MP: Well, Mr Bailey, I am not quite as gloomy, if I can put it that way, in that context.

Chair: Realistic.

Mark Prisk MP: Okay, that is perhaps fairer. You say "realistic"; I say "gloomy". The reality is we are in very difficult and straitened times. The current Government, I think rightly, as a member of it, have taken the view that we need to tackle this deficit that we have inherited. That means there is going to be tremendous pressure right across every part of the public sector, so it is not as easy as it might have been two or three years ago to put in the funds that we would like to. Nevertheless, I think the landscape that we are shaping—one where the partnerships are genuinely reflective of an area that people feel an identity with, where you put the business, the local authority and other civic leaders together and there is accountability—is the right shape for that.

Now, at the moment the picture is obviously difficult financially, but I do not think we should solely hark on principally about how much grant, or how much subsidy there is. It is also about the powers and how they are used. It is about getting the benefit of civic and business leaders to work more closely together. I think there is a real benefit from that.

Q269   Nadhim Zahawi: I beg your indulgence just so that we can have a balanced inquiry. I do recall that when we asked the IOD, the FSB, the CBI and the Chambers about funding, they said that was not the priority, which I was surprised at, I have to be honest. The priority was strategic vision, direction and passion from the LEPs, and the board of the LEP, in terms of delivering on some of the infrastructure projects that businesses were worried about. That did come across in the evidence session that we had with them, as I recall.

Mark Prisk MP: Certainly it would not reflect the discussions that we have had with them both now as a Minister in Government, but also prior to this when thinking through the priorities for businesses on the ground.

Q270   Luciana Berger: Just specifically on the EU funding, carrying on from previously. If LEPs are not in place to cover all areas by very early next year, how do you think they will be able to attract new EU funding from 2013?

Mark Prisk MP: The new scheme starts in 2014.

Luciana Berger: Yes, but it is sometimes up to two years for the lead-up times.

Mark Prisk MP: Well, the priorities are pretty much set for the period through to 2013 now in fact, because they tend to have an 18-month clearance programme with Brussels and so on. The reality is that the broad commitments, as it were, in terms of ERDF, for the period to the end of 2013, are pretty much set. What we are looking to do is to see how we can involve the LEPs so that they can be a part of the discussions about how those are managed. I thought what was interesting was that most of them didn't come forward and say, "We want to run these," but what they wanted to do was to be able to participate in how they are managed. That is a different thing. They wanted to have their say, as it were. As for the period after 2013, when the new phase starts from 2014, that is something which obviously I am not in a position to go into detail on today.

Q271   Luciana Berger: You see that everything will be done centrally then? If you said that your feedback has been that LEPs only want to be part of the management, rather than the application—

Mark Prisk MP: It is a complicated situation. ERDF have a managing authority, which in this case is a Government Department—the Communities and Local Government Department. It will then have delivery partners on the ground, which are at the moment predominantly RDAs, but they have other projects where there are other delivery partners. What we are looking to do is to manage that process, keep the managing authority at the centre constant and then look at how we transfer that across to the LEPs. That is an orderly process across through to that. You have the central managing authority, which is what Brussels requires of any EU member, and then they have their delivery partners. Obviously what we are looking to do is to make sure that we involve the LEPs as the potential new delivery partners, so that they are able to engage in the discussion about the overall priorities, the topics, if you like. The types of expenditure under EDRF are predominantly set now and up until the end of 2013. You are right, it tends to take about 18 months or two years in advance. The broad parameters of what they are going to spend those on are defined, maybe not with regard to individual elements or key priorities within them, but what we are looking to do is make sure we can involve the LEPs in as effective a way as possible, so that they have a say in choosing within that programme, let us say on regeneration, how that might be delivered.

Philippa Lloyd: As the Minister said, most LEPs that have come forward have said that they wanted a greater say in ERDF implementation rather than taking on delivery per se. CLG are working hard with the RDAs in order to look at new delivery arrangements, because obviously we will not have RDAs going forward, in order to minimise disruption and to ensure that we have continuity of ERDF going forward. Obviously that involves working with the Commission as well, so that is what is going on at the moment.

Q272   Rachel Reeves: The RGF is obviously £1 billion over two years. Most regeneration and infrastructure projects take longer than two years. Do you envisage the RGF being something that continues, and would bids for projects that last longer than two years be considered?

Mark Prisk MP: The precise criteria of what will and will not be accepted by the RGF will be set out in the White Paper. In terms of the funds, you are right to say that programmes will very often go beyond that period and that is something that Lord Heseltine and his panel will look at very carefully, not least looking at what the key criteria are, which are of course first of all something that will encourage growth, and, secondly in particular, growth in an area where there is a particular dependence on one sector, namely the public sector, and how that can be better diversified. Those will be the principal criteria on which it will be based. The time frame is not something I can comment on at this stage.

Q273   Rachel Reeves: Will we hear more about that in the comprehensive spending review?

Mark Prisk MP: You will hear more about it in the White Paper.

Q274   Rachel Reeves: What about whether this is an ongoing pot of money? We know that for the next two years there is £1 billion. Will we learn in the comprehensive spending review?

Mark Prisk MP: It will be in the White Paper. The comprehensive spending review will obviously cover the big envelope numbers. The White Paper will then be able to set out the details of the RGF, the criteria, the process and so on. So that is where you will get that detail.

Q275   Rachel Reeves: Okay. So we will know when we have the White Paper whether the Regional Growth Fund is just two years or whether it is an ongoing facility.

Mark Prisk MP: It will set that out. It may take the view, and it may be a logical view, which is that in fact they will want to wait to see how that is progressed in the first year before making a final decision. However, clearly you will have to reflect on the fact that the White Paper will set out proposals in the context of the spending envelope as a whole. Clearly the spending review will be looking at that whole period through until the end of this Parliament.

Q276   Rachel Reeves: I am sure that you will tell me that this will be set out in the White Paper as well. There was some suggestion that there would be a minimum bid, or a recommendation of minimum bids, to the RGF of about £1 million. The business representatives who came to see us, especially the FSB, suggested that bids for smaller amounts of moneys would be very useful, especially for smaller businesses. Is that something you would envisage or that you could comment on at the moment?

Mark Prisk MP: I think at this stage the criteria, as I say, will be finalised and I am wary of giving you one element and not the whole picture. That will be set out in the White Paper. I would be surprised if the figure were to go below £1 million, as perhaps the FSB have suggested.

Q277   Chair: When will we get the White Paper? Can you give a target date?

Mark Prisk MP: As you will understand, Mr Bailey, we have the comprehensive spending review tomorrow. I think I cheerfully said it was in two days' time earlier, for which I apologise—it has been a long day. Once that has happened there is a whole series of announcements that we will want to make, not only this Department, but many others. Because of what will have happened then, of course, we will have budgets that we can start to flesh out in terms of activities. For that reason, I cannot give you a date at this stage, in terms of the White Paper, but I do not know whether my officials want to explain the process that we are going through, which might help outline things.

Philip Rycroft: Just very briefly. Obviously from the spending review the sequence of managing that information into the public domain of the White Paper has to take its place in the queue, if you like, in terms of management of that. For that reason, there is not a firm date yet, but we hope to get one very soon.

Q278   Chair: So we hope to get an announcement of when it will be very soon, or we will get the independent—

Philip Rycroft: A firm date to which we can work.

Q279   Rachel Reeves: Bids into the RGF, are they due in December?

Mark Prisk MP: I will need to double check with my officials on that so I do not give the wrong answer.

Philippa Lloyd: Yes they are. The RGF itself has to be launched very soon.

Q280   Rachel Reeves: Okay. Will we have the White Paper before this?

Mark Prisk MP: That's a good way of asking the same question.

Philippa Lloyd: It all depends on the decisions taken on the timing. It could be at the same time as the White Paper or it could be earlier. Decisions on that will be taken very soon.

Q281   Luciana Berger: Who takes that decision? Who is ultimately responsible for deciding the timetable?

Mark Prisk MP: Well clearly not just one Department, because there are financial issues, there are legal issues and there are issues across other Departments. It is something that has to be dealt with across Whitehall.

Q282   Chair: Can we move to an issue we touched on earlier? The issue of structure and accountability. We had a discussion about the level of official Government recognition and the legal entity that LEPs would have. Will LEP accounts and performance be audited and if so, by whom?

Mark Prisk MP: Where an LEP takes on a function and therefore draws funds down from a Government Department, then we would manage that as we would manage any other arrangement in terms of public accountability and so on. Clearly where a local partnership is engaged in using its own resources, they will be accountable in the normal way that they would in those functions. There is a distinction between the two. It is important to bear in mind that these are not non-departmental public bodies; these are local partnerships. Therefore, we will not centrally be trying to impose some sort of heavy-handed, detailed central accountancy process. Where they are dealing with their own resources, they will be subject to their own normal processes. Where we as a Department, or another Department, are bringing funds forward, then logically obviously we will track, monitor and scrutinise that as we would normally.

Q283   Chair: If LEPs have drawn down Government funds as you said, will there be a process for, if you like, monitoring those funds—their outcomes and value for money—and will the assessment of them and the details be laid before Parliament?

Mark Prisk MP: There will be the normal performance management and monitoring of that process. I do not know if my official want to add to that in terms of—

Q284   Chair: I would be grateful for an elaboration on this.

Philippa Lloyd: On grant conditions, where partnerships receive funding from Government, grant conditions would set out the proper accountability, including appraisal and evaluation arrangements, as we would normally.

Q285   Chair: Will there be some sort of value for money assessment as was done with the RDAs by PWC, for example?

Mark Prisk MP: I do not think we have taken a view in the context of saying that if as a Department we are engaging with a series of organisations, in this case LEPs, then clearly we want to monitor that very closely and make sure we are getting value for money. As for the formal decision about the nature of that, we have not taken that decision yet.

Q286   Chair: One point on that. The Audit Commission has been earmarked for closure. What will be the successor arrangements in the context of monitoring LEPs.

Mark Prisk MP: In terms of monitoring local government you will appreciate that that more specific issue is beyond my remit. I think I would probably be wise not to stray beyond it too far. As I say, clearly every local authority—or more to the point, every LEP—will be subject to normal performance measurement. However, in terms of central Government funding, which is what I am focussed on and is part of my budget, that will be dealt with as we deal with any other public partner, as it were.

Q287   Nadhim Zahawi: Just a supplementary point on that. Presumably local accountability kicks in, and the boards of those LEPs will have a governance structure to them, and that would be dealt with locally in the normal way.

Mark Prisk MP: Exactly. I think what Mr Bailey was concerned about was the inter-relationship between the LEP and the central Government. However, you are absolutely right. I think the element that we should not ignore is the fact that if there is a local public body that is a partnership, it will be directly accountable locally.

Q288   Nadhim Zahawi: Just rolling the clock forward. If in seven years' time there is a change in the politics of a particular local authority and they have a seven-year itch and want a divorce from the LEP, what would happen then? Does that cause turbulence in terms of business?

Mark Prisk MP: If the partners fall out, clearly we are happy to take what I would describe as a very informal role of marriage guidance. However, we do not want to try and force them. I would be surprised if a political party and a local authority decided to walk away from a successful partnership. We recognise that over a period of seven, eight, 10 or 15 years, there will be changes. Of course there will. Some partnerships will be very successful and others will struggle. That is the nature of these things. But I think our view will be that it is not for us to wade straight in and dictate who does what.

Q289   Nadhim Zahawi: Finally, we hear from Bob Neill that London will have its own LEPs. What is your view in terms of LEPs for London?

Mark Prisk MP: The LDA is not directly within my jurisdiction. It is within the Mayor's jurisdiction, and we want to work closely with him and the local political and business communities in London. We have sought expressions of interest in how LEPs might be formed, and we are expecting those to be returned to us on 5 November.

Q290   Chair: Just before we conclude, could I just get back to the issue we touched on before regarding the legal status of LEPs? If they are not on a statutory footing, what would be the legal basis for monitoring them?

Mark Prisk MP: Most of these partnerships will probably have a company status in legal terms. I think we should distinguish between a statutory footing—in other words, what I interpret by that is that we pass a new piece of legislation to create a new, different kind of legal animal. Many of these partnerships will be part of a limited company or something of that type. There will be variations of that, and that is why we have said that we will not be too prescriptive about the legal personality, but they will need to have a legal personality.

Q291   Chair: Presumably if they are set up on some sort of company basis, then appropriate company law would be exercisable. Is that correct?

Philip Rycroft: Exactly. They would not be exempt from company law. Of course, Government have arrangements with a whole variety of bodies all the time. In terms of the standard accounting procedures, the visibility to Parliament of Government expenditure, the monitoring of that and the value for money, there will be no exemptions for LEPs from all of those normal processes in terms of the good line of sight and in terms of the proper expenditure of public money.

Q292   Chair: Thank you. That concludes our questioning. We have gone from Anne Boleyn, appropriately to marriage guidance and then the French revolution. I must confess, when we decided on this as a topic I had not realised just how far and wide it ranged. Thank you, Minister and your officials. We will be deliberating and producing a report with recommendations fairly shortly. Thank you very much.

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Prepared 9 December 2010