Conclusions and recommendations
The creation of new Local Enterprise Partnerships
1. 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. (Paragraph 22)
2. 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. (Paragraph
25)
3. 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.
(Paragraph 34)
4. 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. (Paragraph 45)
5. 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. (Paragraph
49)
6. 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. (Paragraph 55)
7. 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. (Paragraph 56)
The functions of Local Enterprise Partnerships
8. We
welcome the fact that the Government appears to be taking a flexible
approach to the national and local functions. However, for this
to become a reality, the Government will need to demonstrate that
it is committed to devolving functions where there is clear evidence
to show that they have already been managed well at regional level.
(Paragraph 61)
9. We conclude that
the Government's list of potential roles for LEPs appears broadly
consistent with the evidence presented to us on suitable priorities
for the new bodies. However, while we welcome the further details
on LEP activity contained in the White Paper, the Government must
guard against a re-run of the history of RDA mission creep. (Paragraph
65)
10. We welcome the
Government's intention that LEPs should be encouraged to work
effectively to meet local skills demands. Without distracting
from their aim of fostering enterprise and removing barriers to
growth, LEPs can clearly have it on their radar to identify both
opportunities and gaps and should work with local training providers
to address those objectives. (Paragraph 72)
11. Further education
involvement in LEPs seems to us to be particularly important to
addressing skills gaps, while higher education involvement makes
sense from the point of view of encouraging ideas for LEPs to
use in innovation. We believe that LEPs should consider co-opting
representatives of further education and higher education onto
their governing bodies, either permanently or on an ad hoc basis.
(Paragraph 73)
Collaboration and competition between Local Enterprise
Partnerships
12. The
challenge facing both the business and political community will
be to ensure that, where appropriate, LEPs collaborate to the
benefit of all parties. Therefore, we recommend that the Government
consider making LEP recognition conditional on membership of a
knowledge sharing network so that weaker LEPs have access to the
experience and know-how of others, or even a duty to cooperate
similar to that envisaged for planning bodies. (Paragraph 80)
13. We welcome the
Government's agreement that strategic coordination of certain
projects or sectors may require groups of LEPs to work together,
including on a regional or sectoral basis where appropriate. Where
there is agreement among LEPs that there should be a body to perform
such coordination, we recommend that the Government support it.
(Paragraph 87)
Timing and transition of the change to Local Enterprise
Partnerships
14. While
the truncated timetable for LEP bids has been less than perfect,
it has delivered 24 approved bids, which will now go forward.
However, their coverage of England is patchy. We agree with the
Minister that they could act as pathfinders of the next tranche
of LEPs but we recommend that the Government intensify its support
for those bids that need more work. The second tranche of approvals
should happen as soon as possible, not least because of the imminent
deadline for the first round of Regional Growth Fund bids. (Paragraph
97)
15. Universal coverage
by LEPs may not be necessary, but gaps should not result from
Government non-approval of bids for areas that have expressed
a wish to have an LEP. Instead, additional support should be targeted
to such areas to enable them to meet the requisite approval standards.
(Paragraph 98)
16. The need to support
recovery and growth with the necessary intelligence should be
of pre-eminent importance in spending priorities, even at a time
of highly constrained public finances. We recommend that the Government
set aside funds for managing retention of RDA expertise, if necessary
by providing proportionate incentives for an adequate number of
RDA staff to remain in post or by providing interim funding for
recruitment to LEPs pending establishment of more permanent LEP
funding models. Furthermore, the Government should bear in mind
the fact that retention of RDA expertise may also assist in developing
those LEP bids which fell short of approval in the first round.
Evidence to us suggests the need for a proactive approach to these
issues by the Department's transition team. (Paragraph 106)
17. The Government
urgently needs to finalise the process of setting clear spending
mandates for RDAs (including for their day-to-day administration
budgets between now and wind-down) so that there is certainty
for businesses on the extent of future funding of projects and
broader business support. (Paragraph 109)
18. We note that the
Government will announce the new delivery structure for European
regional funding at Budget 2011. We will carefully monitor whether
that structure addresses the ability of LEPs to win EU funding.
In the meantime, the Government has to ensure that there is no
hiatus in funding in the period between the winding down of RDA
activity and the start-up of other projects, including Regional
Growth Fund projects. It is crucial that the construction of the
new LEP system does not jeopardise the allocation of funds either
in the current or in the future spending rounds. The extent of
RDA expertise in preparing bids for EU funding is also another
reason to put in place a proper transition plan for the retention
of a level of RDA expertise. (Paragraph 111)
Funding and resources for the new bodies
19. We
welcome the Local Government Resources Review and its recognition
that alternative funding models based on potentially greater contributions
from business would require support and endorsement from the local
business community. However, variations between local economies
must be addressed when considering such models. Given the importance
to local authorities and LEPs of developing new funding streams,
there is a risk of a gap in funding unless the Review is conducted
expeditiously and subsequent legislation introduced as soon as
possible. (Paragraph 116)
20. LEPs will not
necessarily require large budgets to run their operations, but
they will need a degree of independent financing which will take
time to develop on a sustainable basis. Innovative funding methods
such as tax increment financing will need to be trialled before
being applied generally, and in any case will probably not be
suitable for all local economies. Furthermore, the private sector
might not be willing to stump up cash until LEPs have a track
record of success, so there is a risk of a short-term funding
gap. We strongly recommend that, where there is a demonstrable
need, the Government consider setting aside funds to support those
LEP start-ups which lack the initial capacity to establish themselves.
(Paragraph 122)
21. We believe that
the transfer of RDA assets should be assessed on a case by case
basis. Given their potential importance to future development
projects, transfer should be expeditious but should avoid any
risk of a "fire sale" at a time when land prices remain
depressed. The process of disposal needs to be transparent and
should be open to scrutiny. If disposal is used to pay off part
of the national debt, the Government should favour bidders who
can demonstrate that their proposed use of the relevant asset
will benefit the local economy. We further recommend that the
wind-down plans of the RDAs be made publicly available. (Paragraph
126)
22. With business
support funds necessarily constrained, the Government must ensure
proportionate support for all sectors of the economy, consistent
with its overall objectives. Where the criteria for certain funding
mechanisms, such as the £1 million threshold for the RGF,
might effectively exclude certain sectors, it has to ensure that
other funding routes are clearly identified. Furthermore, the
RGF must be clearly demarcated from major national infrastructure
investments. (Paragraph 131)
23. The bidding process
for the Regional Growth Fund will need to be kept as simple as
possible to allow less prosperous areas and less well resourced
projects to compete fairly. The Independent Advisory Panel deciding
on bids has to be alive to this, and should take this into account.
Looking behind the surface to the potential of less well presented
or even less well thought out applications should be part of the
Panel's role. (Paragraph 134)
Powers and accountability
24. LEPs
will need to have clear powers to influence and determine local
authority policy or risk becoming nothing more than talking shops.
Such powers might usefully be set out in a memorandum of understanding
between the LEP and its partner local authorities. While we understand
the Government's reluctance to set out a statutory framework for
LEPs, we believe that agreement on terms of reference for how
such relationships will be built would encourage sharing of best
practice to the benefit of both business and local authorities.
(Paragraph 146)
25. It is vital that
all relevant Government Departments fully support LEPs and, where
appropriate, devolve power to them. We recommend that the Government
consider directing Departments to prepare memoranda of understanding
between themselves and LEPs setting out a commitment to devolved
power. Publication of those memoranda would be an excellent first
step on the road towards greater consistency in relations between
Departments and would have the potential to incentivise LEPs to
work for greater devolution of power. (Paragraph 147)
26. A system as innovative
as that of Local Enterprise Partnerships must be subject to proper
performance and value for money review. To achieve that, it is
critical that the Government put in place measures for auditing
the performance of LEPs based on consistent data measures and
criteria. We strongly discourage the Government from recognising
any LEP without insisting on full local scrutiny—including
by publishing of accounts and minutes where appropriate and by
giving local stakeholders the means to question LEP boards. Furthermore,
where LEPs are in receipt of public funds we recommend that they
be subject to an independent and transparent auditing process
meeting the minimum standards required for NDPBs. (Paragraph 151)
27. LEPs will need
to develop ways to meet the challenge of changes to the local
and national political landscape. In order to facilitate this,
we recommend that the Government consider the establishment of
an independent process for validating any changes in LEP boundaries.
(Paragraph 156)
Overall conclusions
28. Local
Enterprise Partnerships offer a radical new approach to local
growth and the relationship between local government and business.
The partnerships face the challenges of limited resources and
the need to collaborate while maintaining healthy competition.
The Government also faces the challenge of ensuring a successful
transition to the new structure, respecting local wishes while
pushing for maximum national coverage of LEPs so that no area
is left behind. For LEPs to be a success, the Government will
also have to commit to devolving power where possible, and supporting
LEPs in their start-up period both through appropriate financial
support and retention of RDA know-how. (Paragraph 157)
29. All sides, including
business, need to engage to overcome the potential difficulties
caused by local politics. The Minister has himself acknowledged
that there needs to be a clearer focus on economic growth. A great
deal of work and creativity is required from all involved, but
the prospect of more vigorous, more responsive local economies
is to be welcomed. We plan to revisit this subject to see how
the new structure is developing, in a year to 18 months. (Paragraph
158)
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