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


2  The Creation of New Local Enterprise Partnerships

The record of the RDAs

13. The new Local Enterprise Partnerships will replace the existing Regional Development Agencies. The RDAs came into existence in 1999, bringing together a number of structures and funding streams which had focused on regeneration, including English Partnerships, the Rural Development Commission, regional inward investment organisations, regional supply chain offices, single regeneration budget teams and innovation and enterprise teams (in Government Offices). The original statutory remits of the RDAs were (for each of their respective areas):

(a)  to further economic development and regeneration;

(b)  to promote business efficiency, investment and competitiveness;

(c)  to promote employment;

(d)  to enhance the development and application of skills relevant to employment; and

(e)  to contribute to the achievement of sustainable development in the United Kingdom where it is relevant to [their] area to do so. [11]

They were also obliged to prepare and keep under review a regional economic strategy for their area.[12]

14. However, over time the RDAs' functions expanded to include innovation, sectoral development, tourism, implementation of digital access, transport infrastructure, resource efficiency, social exclusion and response to economic shocks.[13] In addition, in 2006 they acquired a PSA (public service agreement) target to "[m]ake sustainable improvements in the economic performance of all English regions and over the long term reduce the persistent gap in growth rates between the regions, defining measures to improve performance and reporting progress against these measures by 2006".[14]

15. In some activities, for example economic shocks, there was evidence of effective intervention. EEF asserted that "RDAs played a very important role in gathering good quality economic intelligence based on their understanding of the area and preparing areas very well for when they encountered economic shocks".[15]

16. The TUC agreed:

    We think the RDAs have been very important in providing adequate co-ordinated responses to economic shocks and…the committee heard before about the Rover taskforce, but I think maybe an even more current example is the Corus situation in the North East, where the Regional Development Agency worked closely with local councils and local businesses, with Jobcentre Plus and others, including trade unions, to put in place a package of support, including support, for example, for apprentices whose contracts came to an end with the closure of the Corus plant.[16]

17. Other RDA functions, however, were considered to have been distractions from their principal objectives. John Cridland of the CBI put it in this way:

    Arguably, what we got wrong with RDAs is that, when they began to succeed, as so often happens, we became excited and we said, "If they can do that, why do they not do x, y and z as well?" We gave too many things to RDAs, so they almost became the only game in town rather than differentiating where region was the main issue because of an economic zone or where local was the main issue because of a travel to work area. On some issues, such as I have illustrated with the national innovation policy, when we are on a relatively small island with modest resources, greater national drive would work. There is room for each.[17]

18. RDAs also suffered from a perceived deficit in accountability as a result of the failure of the policy for elected regional assemblies. As Tom Riordan of Leeds City Council told us, "one of the problems with the RDAs was that they never managed to become creatures of our regions enough, because of the lack of democratic accountability and despite lots of efforts by people and good working relationships with local government."[18]

19. As non-departmental public bodies, RDAs were directly accountable to central Government through the Department and RDA board members were appointed by the Secretary of State. A majority of the board members had business backgrounds, but each board also included four local authority appointees as well as members from trade unions, the third sector, and usually education. RDAs therefore appeared to provide a forum in which business and local government were able to decide jointly on strategy. However, British Chambers of Commerce told us:

    RDAs had business-led boards, but very many of our business members in the Chambers and probably some of the other business organisations as well often felt frustrated that they weren't strong representatives of the business community's voice as a whole or that they only represented a business that actually was involved in public sector contracting, etc. There were always some frustrations around that.[19]

20. There was also criticism that RDAs did not achieve the level of private sector leverage seen with the Single Regeneration Budget which had preceded them.[20]

21. EEF gave the following appraisal of the RDAs:

    The RDA network chalked up both successes and failures in its 12 year history. It is therefore important to look at the strengths and weaknesses of the RDAs as we move towards a new system of sub-national governance.

    RDAs improved the understanding of local economies and their connections with businesses and helped to identify and deal with the consequences of economic shocks. They were also able to catalyse delivery of infrastructure that would have economic benefits beyond Local Authority boundaries and took a strategic approach to planning decisions.[21]

22. It is clear that while RDAs provided many benefits to their regions, mission creep and the lack of a clearly defined strategy undermined their success. Furthermore, they suffered from a democratic deficit. A key test of the new Local Enterprise Partnerships will be the extent to which they learn from both the successes and the failures of the RDAs.

The record of other existing economic partnerships

23. Running alongside the RDAs were a series of ad hoc economic partnerships between business and local government. Several LEP bids have been based on those networks or partnerships between business and local government, including those from Greater Manchester, Leeds City Region, Coventry and Warwickshire, Thames Valley Berkshire, and West of England. There are other such partnerships, both at higher and lower levels than that of LEPs, among them Furness Enterprise, Central Bedfordshire Strategic Partnership, Gatwick Diamond, South East Economic Partnerships, South East Diamonds for Investment and Growth and the Northern Way.

24. The overall impression given by the persistence of these partnerships and the quality of some of their submissions, both to the inquiry and as bids for LEP status, is that they offer a track record of successful co-working between local authorities and businesses. What is perhaps regrettable is that the decision to move forward to LEP bid invitations was not made in the light of at least some transparent review of the relative successes of these bodies, and of the lessons to be learned from them, particularly those operating at the same functional economic level as LEPs. A proper evidence base for the policy decision would have included such a study, with consideration of the merits of such proto-LEPs against the merits of retaining an 'RDA lite' structure; that is, a retained RDA system but with a slimming back down of RDA functions to those originally envisaged.

25. LEP policy is already being implemented, but it could be proceeded with alongside an examination of the record of some forerunners to LEPs, so that lessons could be learned from their performance and from any failings. The learning curve of the initially successful 24 bidding organisations is one that could also contribute to the success of other, following, LEPs and help to even out performance. Given the important part that LEPs will play in recovery, we recommend that the Government undertake a rolling review of the first tranche of LEPs.

LEPs as an opportunity for culture change

26. The evidence submitted to us indicated broad support in principle for the move to LEPs. That support represented a reasonable cross-section of bodies such as Centre for Cities, University of Plymouth, Pennine Lancashire Chief Executives, Yorkshire and Humber Stakeholders Group, and the Greater Manchester Chamber of Commerce. Of the 131 submissions to us, very few, if any, were entirely opposed to the idea of LEPs, although many had reservations about certain aspects of how they would work. John Cridland of the CBI said, "what is encouraging [...] is that everybody, all key stakeholders and existing bodies, is accepting the principle of change. Nobody is trying to swim against the tide."[22] Chris Fletcher of Greater Manchester Chamber of Commerce commented that: "businesses are very interested in this; there's a great deal of interest out there—a surprising amount of interest out there."[23]

27. The positive reaction appears to be based on the scope for LEPs to facilitate better cooperation between business and local government (flowing from the inherently smaller geographies of functional economic areas, compared with regions), provided there is proper business engagement.

Scope for better business and local government cooperation

28. Louise Bennett of Coventry and Warwickshire Chamber of Commerce, itself a signatory to the Coventry and Warwickshire LEP bid, set out the advantages of LEPs to the partnership between business and local government, saying:

    I think that having the private sector at the table gives you a stronger barometer of what's going on in the economy, both locally and globally, and I think it gives us a real opportunity to have very much demand-led local economies.[24]

29. The CBI highlighted the importance of dialogue between local authorities and business. It argued that "too often, the business community and the local authority world are not sufficiently involved with each other. It is clear to us that there are some sub-national issues for the business community which are of great importance, where business is an absolutely key stakeholder."[25] This point was reiterated by the Institute of Directors who described the interaction between the two in the following terms "in our experience, they are not sour; they are not bad; but there is a lot of misunderstanding between the two. LEPs present an opportunity for us to address that".[26]

30. Among our first panel of LEP witnesses, Alex Plant of Greater Cambridge and Greater Peterborough saw LEPs as an opportunity to improve on this. He believed that LEPs had the potential to be "truly business led" and have a "genuine local focus and differentiation".[27] Paul Gresham of Gatwick Diamond Initiative added: "Absolutely, the business focus is important. SEEDA, which was our RDA, was very supportive, but it did have a large geographical patch."[28] Geoff French of the Enterprise M3 bid commented: "LEPs give you the opportunity to look at the geographic areas and have logical areas for each LEP, rather than areas that are dictated by historic boundaries, which are really no longer applicable in many instances."[29]

31. The need for real business commitment and involvement was highlighted both as an opportunity and a challenge. The Local Government Association believed that:

"unless you have everybody in an area signing up to what's on offer, you are not going to get the passion. That was the disadvantage that some RDAs had [...] Now, if you have a group of people—local authorities and businesses—who go to the trouble to come forward with a proposal, and they have the passion about that proposal, then that has to be the right way forward."[30]

32. In a later session, Geoff French of Enterprise M3 referred back to this, saying:

    I was looking at the evidence given by the Local Government Association, [who] spoke about having areas that were small enough or appropriate enough that you could have a passion for them—that was the word he used—or an affinity for them. I think that's very much the case. I can have an affinity for North Hampshire and the M3 corridor, because that's where I spent all of my working life, but not for some larger amorphous mass.[31]

Barrie Williams of Business Voice West Midlands put it in this way:

    I think that, as a previous speaker said, it's about areas of business that have an affinity with each other. There are natural communities of businesses that work around specific industries very often, and whether they cross borders or are on the borders or not, that's the group of people that want to come together, because they are the people who can really make the thing work.[32]

33. Yorkshire and Humber Chambers of Commerce rightly set the bar very high for LEP aspirations. It said that "LEPs had to 'ramp up' business involvement way above what has been done in most LSPs[33] in the region and in the Leeds City Region pilot". [34] It also argued that Government should reject proposals which did not demonstrate a true partnership with business. It concluded that "businesses need to be directly involved in the formative stages of the LEPs, not asked to sign up to a pre-defined structure and plan".[35]

34. It is clear that there is a significant level of enthusiasm for a fresh approach to partnerships between business and local government; and one which is based on a greater affinity for local economies among those participating. We conclude that LEPs have the potential to offer a more dynamic approach to enterprise through local businesses and local government. LEPs may also provide an enhanced opportunity for small and medium sized businesses to have a greater say in local development priorities. The opportunity for greater business command represents, however, a challenge both to business communities and to local government to be yet more proactive and creative.

Functional economic geography and critical mass

35. The joint BIS and CLG letter of 29 June 2010[36] indicated that LEPs should reflect "functional economic areas"; in other words, areas that are reasonably self-contained and coherent in terms of their travel-to-work pattern or economic homogeneity, also taking into account matters such as extent of supply chain or transport infrastructure. Working with such areas has the advantage that they are more likely to deliver business engagement.

36. It is clear that some RDA regions were simply too big to profit from that kind of local empathy. Examples frequently cited include the distance of Cornwall from Bristol, or the arbitrary separation of counties such as Hertfordshire (which fell into the South East England Development Agency's area) from its neighbour Bedfordshire (which came within East of England Development Agency territory) notwithstanding that the considerably more distant Sussex was still counted within the South East, and the totally different nature of the Manchester economy from that of Cumbria.

37. It is worth noting, however, that RDAs' policies were far from being applied on a blanket basis within regions, and were capable of nuance toward local needs; merely because the SWRDA counted both upland Devon and Bristol within its geographical remit did not mean that it lacked the sophistication to apply different considerations to them.[37] However, it is also true that there was dissatisfaction with RDA procedures: in its evidence, the Regional Studies Association said "The Local Enterprise Partnership [...] proposals are welcome in the sense that they may free localities from top-down national control through literally volumes of guidance and regulation that characterised the functioning of the [English] RDAs".[38]

38. On the question of whether local authority boundaries fit the bill for deciding what is a functional economic area, the Centre for Cities publication Beyond the Boundaries: Why cross-boundary collaboration matters and what this means for local enterprise partnerships[39] highlighted the distinction between such boundaries and real economies, observing that many UK cities are "'under-bounded' with administrative geographies that captured only part of their real economic areas, including "the area where people commute, shop and do business."[40] Examples cited include Leicester, with only 51% of Leicester's jobs taken by Leicester residents, and Sunderland, where the Nissan supply chains extended substantially beyond the local authority area of Sunderland.

REGIONAL VARIATIONS

39. Different parts of England will face different challenges, and the critical mass and degree of regional coordination necessary for LEPs will vary between different parts of the country. Tom Riordan of Leeds City Council believed that this was reflected in the North of England:

    I think the further away from London you are, the more critical mass you need, from my experience of the last few years in the RDA. Particularly in the North, we need significance to catch the eye of those national agencies and policymakers who sometimes find it quite hard to get their heads around the geography of the country."[41]

40. The CBI, a survey of whose members had produced some 66% support for a continued level of regional coordination, noted that requirements differed across the country but that support was far stronger in the North and the Midlands, where regional identity is stronger, than in the East and the South, where it was not as strong. John Cridland argued that:

    You see in a number of those Northern and Midland regions that business groups have said that, even if there are a number of LEPs, there may be a need for an overarching body that can deal with some of the bigger ticket infrastructure issues, which a number of us have said is a prime purpose of business engagement with local authorities across boundaries.[42]

41. Speaking of the six West Midlands LEP bids, Sir Roy McNulty of Advantage West Midlands believed that a level of regional coordination in the West Midlands would be necessary:

    It would be very difficult for six LEPs separately to address either of [the] issues [of supply chain and international competitive advantage. A shock as big as the Rover collapse spread right across the West Midlands. Major industries like automotive and aerospace, which again spread right across the West Midlands, would not wish to deal six times with different bodies to address the macro issues that concern them. That point has been made very forcibly to me by people from the automotive sector and the aerospace sector. I think all of that points to the need…for some form of coordinating body.[43]

42. The North East Economic Partnership[44] submitted a proposal whereby LEPs in the North East would collaborate on a wide range of issues including legacy projects of One North East, carbon capture and provision of expertise for developing the low carbon economy, inward investment, sectoral support and applying for EU funding. We understand that the Government intends to recognise and work with the North East Economic Partnership, albeit the details are presumably still being worked on, and we welcome that willingness. There appears also to be a strong wish to establish a body to represent the views of Yorkshire LEPs.[45] Other such partnerships may emerge, for example in the West Midlands.

43. A consistent theme in the evidence we heard was that such partnerships should be allowed to emerge and evolve organically within the relevant areas based on what local bodies agree is needed.[46] The County Councils Network described these as "coalitions of the willing."[47] Chris Fletcher of Manchester Chamber of Commerce believed that the vital factor in establishing such partnerships was that they were "a product of the LEPs, not the other way around." If they were not, he warned that RDAs would merely be reinvented.[48] Barrie Williams of Business Voice West Midlands agreed, though he raised the concern that should evolution not start "on day one" then services such as the Manufacturing Advisory Service could be lost.[49]

44. The need for well-constructed coordination was put forward in the Centre for Cities paper Beyond the boundaries. Taking the example of the Birmingham city region it found that manufacturing firms in that area could choose "between 55 different support initiatives, provided by at least 29 separate delivery bodies and portals". It observed that this was confusing, ineffective and inefficient and that:

    [c]oordinating activities across the real economic area increased the opportunities to reduce confusion, rationalise service provision and realise economies of scale and scope—as well as improve relationships with business who can then have just one main point of contact.[50]

45. We believe that regional groupings should be recognised where there is a wish for them and the Government should be prepared to fully engage with such bodies where they have clear local business support. Where a minority of business community members in an area disagrees with the need for a regional grouping, that minority should be willing to show flexibility in accommodating the majority wishes of members who want to maintain an element of regional coordination. Regional groupings should also be recognised where LEPs believe it is appropriate to have an overarching body dealing with matters such as transport, infrastructure or EU funding.

THE POSITION IN COMPARISON WITH SCOTLAND AND WALES

46. Both Scotland and Wales have their own development agencies, which have dedicated budgets and impressive one-stop shop websites that incorporate clear information for investors on areas such as start-ups and international trade. When we asked the Minister whether he agreed that it would be "bad news" if the English regions were to lose out in comparison with these well focused and well resourced national development bodies, he replied, "it would, but they won't".[51]

47. We are not sure whether to be reassured by the Minister's confidence or concerned. Certainly, Dr. Brian Gibbons, a Welsh Assembly Member, saw the demise of the RDAs as an opportunity for Wales:

    One good thing that the Westminster Government has done is to abolish regional development agencies in England. That was a pretty stupid decision from the point of view of regional regeneration in England, because we know that the investment return from those agencies, particularly the best-performing ones, was quite substantial. However, it removes significant competitors at a regional level from the market. That provides Wales with a range of opportunities that would not have been available to us previously. Therefore, we should be thankful for small mercies.[52]

48. Several organisations considered this to be a risk, particularly if LEPs were not resourced as well as equivalent bodies in Scotland and Wales. They included Leeds City Region,[53] Cambridgeshire Horizons,[54] Councillor David Sparkes for the LGA,[55] and the North West Business Leadership Team.[56] Alexander Ehmann of the IoD took the view that LEPs would not be inherently disadvantaged when compared with equivalent bodies in Scotland and Wales, but agreed that there might be a problem if there is a disparity in resourcing.[57]

49. We note the Minister's confidence that LEPs will not be overwhelmed by the Welsh and Scottish development agencies, but we remain concerned that without a separate funding stream LEPs could suffer. We recommend that the Government, in its response to our Report, set out how those functions which are being best performed in Scotland and Wales will be matched by LEPs in England, in particular in light of the fact that the Regional Growth Fund will not be available to support the ordinary functions of an individual LEP or LEPs.

IS THERE A 'RIGHT' NUMBER OF LEPS?

50. The appropriate number of LEPs was considered at some length by our witnesses. The Local Government Association's opinion was that there were some 50 functional economic areas in England; [58] a figure that corresponded fairly closely to the 55 LEP proposals submitted to the Government. However, British Chambers of Commerce felt that upwards of 50 LEPs was too many, preferring between 35 and 40 on the basis of live and work criteria.[59] The CBI would have preferred still fewer—of the order of 30[60]—while the IoD wanted the minimum number commensurate with continued access to EU funding.[61] EEF argued that 12 to 15 LEPs would be more manageable.[62]

51. EEF and others among the principal business organisations[63] highlighted the risk that undersized LEPs could lack the necessary critical mass. Sir Roy McNulty of Advantage West Midlands believed that a LEP with a population below 1 million would lack "sufficient clout",[64] while the TUC expressed concerns about the capacity of small LEPs, the resources that would be available to them, and "in some cases, we would be worried about their credibility with key partners, including the private sector."[65] Adam Marshall of the BCC put it more specifically, saying: "We would want to see areas like Newcastle and Gateshead, and also like Birmingham and Solihull, which is another one that is identified in the Centre for Cities report[66] as very under-bounded, working more closely with their neighbours to try to get to a more sensible economic scale and geography."[67]

52. Many organisations told us that creating too many LEPs risked creating a confusing and over-fragmented structure, particularly with regard to delivery of LEP functions. Centre for Cities[68] and One Nucleus (a not-for-profit life science and healthcare cluster based in Cambridge and London) were among those who voiced this concern. The latter stated that "nothing frustrates One Nucleus members more than fragmentation. They have neither the resource nor the time to wade through potential 'mind spaghetti (as one member described the potential scenario)'". [69] The Institute of Directors was similarly concerned about LEPs being "too parochial",[70] adding, in oral evidence:

    The Institute of Directors' general concern has been about the LEP proposals that we have seen to date: they have not had enough scale to them. Local authorities have not looked beyond traditional relationships with other local authorities that they felt comfortable with to wider bodies. The risk with that is twofold. First, they are not strategic enough and will not be able to deliver in the areas where we need them to deliver. Secondly, they will not have the broad based support of business in order to deliver. To give a specific example, in the South, which has been referred to already, I believe there have been 17 proposals for Local Enterprise Partnerships. To garner the amount of business support that is necessary for that, both in terms of being able to go ahead but also the governance arrangements, the way that organisations like ourselves, as national organisations, will engage with those bodies and keep those people engaged is a massive task. The jury is out on that.[71]

53. The Sector Skills Council for Science, Engineering and Manufacturing Technologies (SEMTA) expressed similar worries in its written evidence:

    We have serious concerns that the proposed LEP structure will compound complexity for companies, particularly those with a geographical spread to their premises. It will also increase administration costs.[72]

54. When we asked the Minister whether he believed there was a "right" number of LEPs, he responded:

    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 [about] is whether they are going to be able to make that difference.

55. We conclude that, while there are clear merits in founding local economic partnerships on strong local loyalties, a structure consisting of significantly more than 40 bodies has the potential to result in business confusion, lack of critical mass and insufficient economies of scale. However, a structure which produced 12 to 15 while delivering a simplified structure might risk reimposing those arbitrary associations between areas for which the RDAs were criticised.

56. It seems likely that, with 24 LEPs already approved, the final number will rise to around 40. LEPs should be approved on their business case rather than an artificial maximum number, but the Department must be aware that too high a number of LEPs runs the risk that they will not be effective.


11   Regional Development Agencies Act 1998, section 4(1). Back

12   See section 7 of the 1998 Act. Back

13   For a full list, see Ev 152. Back

14   http://webarchive.nationalarchives.gov.uk/+/http:/www.berr.gov.uk/aboutus/corporate/performance/performance_Framework/page14316.html Back

15   Q 72 [Radley] Back

16   Q 44 [Nowak]; Councillor Sparks also gave some favourable views - see Q 49. Back

17   Q 84 [Cridland] Back

18   Q 125 Back

19   Q 79 [Marshall] Back

20   Ev 143 (Local Government Association), paragraph 6 Back

21   Ev 123 Back

22   Q 95 Back

23   Q 127 Back

24   Q 156 Back

25   Q 70 [Cridland] Back

26   Q 78 [Ehmann] Back

27   Q 118  Back

28   Ibid. Back

29   Ibid. Back

30   Q 59, Sparks  Back

31   Q 120 Back

32   Q 158 Back

33   Local Strategic Partnerships Back

34   Ev w298, paragraph 4 Back

35   Ibid. Back

36   See Annex. Back

37   The Area Action Forces initiative is an example of tailoring approaches to the needs of individual areas. Back

38   Ev w193, paragraph 22 Back

39   www.centreforcities.org/assets/files/10-09-07%20Beyond%20the%20Boundaries.pdf Back

40   Op. cit., Chapter 1, paragraph 2. Back

41   Q 119 Back

42   Q 74 Back

43   Q 3 Back

44   A consortium of the Association of North East Councils and the Northern Business Forum, proposed to operate as a company limited by guarantee. Members of the NBF include the North East Chamber of Commerce, CBI North East, EEF Northern, the IoD and the FSB. ANEC includes all 12 North East strategic councils. Back

45   See, for example, Ev w299, paragraph 10. Back

46   See, for example, evidence from: Devon and Cornwall Business Council, East of England Business Group, Greater Manchester Chamber of Commerce, CEDOS/ADEPT, and the Regional Studies Association. Back

47   Ev w64 Back

48   Q 132; and see also Qq 136 and 137 [French.] Back

49   Q 167 Back

50   Op. cit., page 7. Back

51   Q 219 Back

52   Welsh Assembly debates, 6 October 2010. Back

53   Q 139 [Riordan] Back

54   Ibid. [Plant] Back

55   Q 53 Back

56   Ev w157, paragraph 5 Back

57   Q 94 Back

58   Q 45 [Sparks] Back

59   Q 114 [Marshall] Back

60   Q 114 [Cridland] Back

61   Q 114 [Ehmann] Back

62   Q 114 [Radley] Back

63   For example, British Chambers of Commerce, Ev 100, paragraph 10; CBI, Ev 113. Back

64   Q 10 Back

65   Q 45 [Nowak] Back

66   Beyond the boundaries; op. cit. Back

67   Q 78 Back

68   Ev w36, page 1 Back

69   Ev w167 Back

70   Ev 139, paragraph 1.12 Back

71   Q 75 [Ehmann] Back

72   Ev w212 Back


 
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