Written evidence from Graham Pearce, Aston
University, and Sarah Ayres, Bristol University
1. INTRODUCTION
1.1 In stark contrast to what has been happening
in the rest of Europe in recent years, where most comparable states
have been strengthening their regional institutional structures
(Marks et al, 2008), the Coalition Government maintains
that decision-making in such areas as economic development, housing,
planning and transport at the regional level in England, beyond
London, is unnecessary and lacks legitimacy. It has also tapped
into the "localist agenda" to assert that the current
regional institutional architecture represents a wasteful and
unaccountable tier of bureaucracy dealing with issues that would
be better handled at a local level. Moreover, the Government has
been able to draw on evidence which shows that, despite Labour's
commitment to reduce regional economic inequalities, especially
through the activities of Regional Development Agencies (RDAs),
the North of England still performs very badly compared to the
Greater South East.
1.2 As a consequence the Government has
determined that the RDAs should be abolished and their responsibility
for inward investment, sector leadership, innovation, access to
finance and business transferred to Whitehall. In addition, Local
Enterprise Partnerships (LEPs) are to be established, comprising
business-local authority bodies to lead "improved coordination
of public and private investment in transport, housing, skills,
regeneration and other areas of economic development" (HM
Treasury, 2010, p.31). Reflecting a growing weight of opinion
in favour of the devolution of powers to sub-regions as effective
reference points for the co-ordination of public policies and
resources (Hope, 2009), LEPs will also work across "natural
economic" or functional areas, rather than single administrative
units.
1.3 The Coalition declares that LEPs are
central to its vision of rebalancing the economy towards the private
sector and creating the right environment for business and growth.
Nonetheless, there is no right spatial level at which economic
development policy should be pursued. Drawing upon the findings
of research by the authors into governance in the English regions
over the past decade, the central argument of this memorandum
is that there are considerable uncertainties and potential risks
arising from the current reshaping of responsibilities for securing
sustainable economic development at the sub-national level.
2. FINANCIAL
RESOURCES
2.1 Presently, there is no detail on what
funding streams will be available to the new LEPs. What is plain,
however, is that collectively LEPs will have far smaller budgets
than RDAs, though the Agencies' annual budget has already been
reduced from the £2.3 billion in 2007-08 to some £1.5
billion in the current financial year. In addition, RDAs lead
in managing the European Regional Development Fund (ERDF) and
the delivery of the economic and social element of the 2007-13
Rural Development Programme for England (RDPE). Though significant,
RDA funding represents less than 2% of regional public spend and
while the Agencies have sought to influence public expenditure
managed by other bodies which relate to economic development,
the scale of resources available to RDAs has not been adequate
of itself to make a significant impact on regional economic disparities.
2.2 Reliance on RDA funding varies between
regions and in 2007-08 the North East RDA, received annual funding
equivalent to almost £100 per regional capita, almost five
times that of its counterpart in the South East. Nonetheless,
recent trends in identifiable regional public expenditure show
that spending per capita in the Greater South East has grown more
quickly than in the other regions (Burch et al., 2008).
Indeed, despite reassurances that future resources for economic
development will be distributed in favour of the less prosperous
regions, the planned reductions in public expenditure will exacerbate
territorial divisions.
2.3 LEPs will have the opportunity to bid
for a share of the Government's annual £500 million Regional
Growth Fund (RGF), intended to support projects that have the
potential to deliver economic growth in areas that are currently
dependent on the public sector. The outcome is that LEPs in the
South of England will receive little, if any, "additional"
funding for economic development. However, even in those localities
in receipt of RGF, the level of resource will be insufficient
to address the problems of uneven development. Localities are
not self-contained systems that can resolve deep-seated economic
problems and while devolving powers and resources may assist in
promoting local actions, the need for government involvement at
all levels to increase prosperity and tackle inequalities remains
outstanding (Turok, 2008).
3. COORDINATING
ACROSS POLICY
AREAS
3.1 Notwithstanding Whitehall's ostensible
commitment to pursue a more nuanced approach to meet individual
regions' and localities' needs government in England is predominantly
arranged on a functional basis (Parker et al., 2010). Indeed,
despite attempts to cultivate collaboration, for example via the
Total Place agenda, central departments possess different incentives,
cultures and authority structures that are ill-suited to tackle
interconnected issues beneath the national scale. The RDAs learned
that in order to enhance their areas' economies they needed to
secure influence over organisations responsible for a wide range
of public sector programmes that directly or indirectly relate
to economic development, as well as working with the private sector.
Nonetheless, the task of steering complex governance networks
and effective partnership working to deliver common objectives
commonly requires a considerable investment of time and energy.
3.2 LEPs will face the same set of challenges.
Indeed, the Government expects that they will tackle a wide range
of policy issues that contribute to creating the right environment
for business and growth in their areas. Ideally, local communities
should have the freedoms to orchestrate policies to meet their
own priorities. But policies and budget lines are fragmented and,
compared with local government internationally; English local
authorities possess limited financial autonomy.
3.3 Institutional arrangements at the local
level are also already crowded and it might be claimed that Local
Strategic Partnerships, which lie at the heart of the Local Community
Strategies, as well as Local Planning and Economic Planning Strategies,
already provide an appropriate mechanism for joining up policies
and programmes and engaging a wide range of interests, albeit
at a local rather than a sub-regional level. In addition, LEPs
will be expected to work in close harmony with the multiplicity
of national and local agencies involved in supporting economic
development in its various forms, which also face severe budget
cuts or even closure.
4. WORKING ACROSS
ADMINISTRATIVE BOUNDARIES
4.1 The Government intends that LEP boundaries
should reflect "economic footprints", rather than administrative
units and that the Partnerships seek to connect local economic
policy initiatives with other policy areas such as planning, housing
and transport. Nevertheless, the need for statutory planning across
sub-regions is not currently recognised. Moreover, the apparent
insistence that LEP boundaries should relate only to upper tier
authorities would seem to negate the inclusion of shire county
districts that would sensibly comprise parts of functional regions.
4.2 LEPs will build on the mesh of sub-regional
partnerships that already exist across much of England. They reflect
the importance attached to sub-regional arrangements to deliver
economic development and housing, the economic significance of
city-regions and the drive to promote better sub-regional co-operation
and decision making between local authorities and their partners
(DCLG, 2008). Such partnerships may not only bring together local
authorities, but also include other key public sector agencies
and business, voluntary and community group representatives. Local
authority cooperation, along with other partners, can be weighed
by the presence of fifteen Multi Area Agreements (MAAs), covering
105 councils and including over one-third of England's population
(Russell, 2010). For some "it is possible to envisage a situation
in which, ultimately, a network of cities with strategic powers
to determine planning and investment might render the existing
regional governance structures largely obsolete" (House of
Commons Communities and Local Government Committee, 2007, p.4).
Conversely, in the absence of local government reorganisation
they would not be new political institutions. Indeed, unlike local
authorities it can be asserted that sub-regional structures are
insufficiently visible and accountable to citizens.
4.3 Lessons from efforts to encourage local
authorities to voluntarily cede powers to joint bodies demonstrate
their fragility and unevenness. Indeed, the willingness of authorities
to put aside local interests and provide a collective voice on
issues that have a strategic dimension cannot be assumed. Especially
in the current economic climate local authorities are likely to
be averse to the risks attached to innovative forms of working.
The last government placed considerable stress on establishing
city regions and though separate policy units have been established
to serve Greater Manchester, Leeds and Merseyside, many shire
counties do not aspire to cross-border working and encounter difficulties
in securing sub-regional working arrangements with district authorities.
We were recently advised by a BIS official:
"It feels like the city-region pilots were
a prize in themselves. I've not seen much activity or vision from
them …. At the moment MAAs/city-regions are underdeveloped.
Our problem is how we get local leadership to sign up and work
together. If, at some point, these areas are actually going to
be charged with making decisions and spending money then they're
going to have to be more robust".
4.4 In the North East region, for example,
the outlines of sub-regional structures are in place but, while
the Tees Valley partnership is regarded as having made most progress,
including an unsuccessful bid for city-region status, elsewhere
developments have been gradual. Tyne and Wear authorities have
established a "city-region", geared to making the economy
of the area more competitive and inclusive and have sought Durham
and Northumberland's involvement as a way of strengthening the
case for formal city-region status. Nevertheless, competing territorial
interests have inhibited agreement.
4.5 Similarly in the East of England the
region does not possess any MAAs but there are several sub-regional
partnerships, including Regional Cities East and the Thames Gateway
and South Midlands growth areas. Nonetheless, such partnerships
are of variable strength and particularly difficult around London.
This view is echoed in the South West where local authorities
are described as having "variable competencies", with
some "doing good things", while others were "struggling
to get their act together and will lose out because they can't
play the game" (Pearce and Ayres, 2010). In the Midland's
regions, too, there is a patchwork of sub-regional partnerships,
including the Birmingham, Coventry and the Black Country and the
Leicester/Leicestershire MAAs. Birmingham and neighbouring authorities
has been mooted as a statutory city region for some time but agreement
among local authorities has yet to be reached.
4.6 As the current bargaining around LEP
boundaries reveals, parochialism remains a potent ingredient and
dilemmas around allocating limited resources to competing initiatives
across administrative boundaries will not easily be resolved.
There is also the risk of unproductive forms of place-based competition
and increased inequality (Rodriguez-Pose, 2009).
5. TRANSITION
ARRANGEMENTS
5.1 Beyond a pledge that the transition
from RDAs to LEPs will be "smooth", allowing for "the
appropriate fulfillment of ongoing projects, grants and contracts",
and the announcement that all RDAs will close by March 2012, it
is unclear what the transition process will imply for the RDAs,
local authorities and their potential business partners or for
Whitehall departments. Publicly at least, Ministers' minds appear
unclouded on the matter. Nonetheless, there are several key issues
that need addressing to ensure an orderly transition.
5.2 The Government has stated that certain
RDA functions are to be transferred upwards to Whitehall, but
this could be over simplistic since it will not negate the need
for delivery, for example of business support, at the local level.
Greater clarity is therefore, required about what functions should
be undertaken at national and sub-national levels and which could
be shared.
5.3 If local authorities and business representatives
serving on LEPs are to have joint responsibility, agreement must
be reached on the geographical boundary for the partnerships.
Functional economic boundaries are not easily defined and the
current debate about LEP boundaries has exposed the brittle nature
of efforts to secure local government leadership at the sub-regional
level. It also seems likely that since Whitehall departments are
acutely aware of the need to contain the number of partnerships
the "final" map of LEPs will not only be the outcome
of local decisions.
5.4 Consideration should be given to establishing
arrangements at a regional scale to deal with economic development
issues that transcend the local or sub-regional scales and that
fall beneath the Whitehall radar. This would have the merit of
avoiding the risks attached to superimposing a new set of institutional
arrangements. At the very least these should take the form of
umbrella bodies that facilitate regional collaboration between
LEPs on common issues, along the lines of the South East Economic
Partnerships. A more preferable option that has widely been canvassed
would see the creation of region-wide partnerships, which would
take the lead on key strategic economic development functions
and take control of EU funds.
5.5 Government guidance indicates that LEPs
should provide strategic leadership for a range of functions including
planning and housing, local transport and infrastructure priorities,
employment and enterprise and the transition to the low carbon
economy. They will, therefore, have a broader remit than RDAs
and may, potentially, duplicate statutory activities already undertaken
by local authorities and other public bodies. There is clearly
virtue in seeking to coordinate economic development activity
with other relevant policy areas across local authority boundaries
to maximise the effectiveness of public and private expenditure.
To be effective, however, authorities and their business partners
will need to demonstrate a capacity to enter into commitments
that are long-term and capable of securing joint solutions to
problems and this may require some incentives. But LEPs are not
to be elected bodies and as the Committee itself recently observed:
"business interests cannot be presumed to
take precedence over the democratically expressed wishes of local
communities" (House of Commons Business and Enterprise Committee,
2009, p 35).
5.6 The task of dismantling the RDAs and
transferring their existing functions, including programmes, projects
and funding, either upwards to Whitehall or down to LEPs should
not be underestimated. Individual RDAs commonly have hundreds
of live projects at any one time, many of which are complex and
long-term. In addition, RDA staff possess considerable knowledge,
experience and contacts and there are dangers that these will
be eroded during the transition period. Given the fiscal and organizational
pressures on local authorities there are dangers that in the absence
of additional resources local authorities will be unable to assume
these functions.
6. EUROPEAN FUNDING
6.1 RDAs play an important role in the delivery
of EU funded programmes. Though the level of structural funding
in England has declined in recent years it remains an important
source of expenditure in some regions. Delivery of the ERDF Regional
Programmes and elements of the RDPE was transferred to RDAs from
the Government Offices (GOs) in 2007 in order to better align
European and UK domestic funding in pursuit of more effective
strategic action. RDAs have also become an important source of
matched funding. The Agencies have, therefore, acquired expertise
in accessing and administering EU funds, though most would acknowledge
that because of the complexity and bureaucratic nature of EU funding
regimes this has been challenging.
6.2 The abolition of the RDAs raises important
questions over the management of EU funded programmes. One possibility
is that it could be transferred to Whitehall, which might have
the merit of reducing complexity and costs and providing consistency
and legitimacy for decisions. However, the formulation of and
delivery of ERDF and the RDPE are based upon a requirement that
planning frameworks and funding should involve partnerships of
sub-national bodies and have a regional locus. In the absence
of RDAs these requirements might be met by transferring strategic
responsibilities for EU programmes to the GOs and extending the
operational involvement of first-tier local authorities. Nonetheless,
not all authorities have the staff resources necessary to bid
for, win, and implement EU funded projects and it will be important
to ensure that the European expertise acquired by the RDAs is
not squandered. Furthermore, if funds are not to be lost or left
unspent, it is essential that local authorities and other public
bodies retain a grip on the resources necessary to draw down EU
funds.
6.3 Alongside other sub-national bodies,
RDAs have become a significant source of funding for sub-national
offices in Brussels. These work to ensure that regional interests
are represented in the EU; partners are informed of relevant opportunities,
especially around funding and of opportunities for networking
and cooperation with other European regions and localities. The
elimination of the Agencies and financial pressures on partner
organisations may well result in a significant reduction in sub-national
participation in the EU. For example it will weaken the capacity
of English sub-national government to engage in Trans-European
Networks that facilitate cooperation across both public and private
sectors in areas such as biotechnology, energy, ICT and nanoscience
(see for example the European Regions Research and Innovation
Network).
7. ENGAGING THE
BUSINESS COMMUNITY
7.1 Business representation at the sub-national
level takes a number of forms. The Confederation of British Industry,
Chambers of Commerce, Institute of Directors and Federation of
Small Business each have a regional presence, though regional
activities, organisational structures and cohesiveness with regional
boundaries vary. At the local level Chambers of Commerce are seen
as the main representatives of business. They are frequently consulted
by local authorities on a wide range of issues and speak for business
interests on Local Strategic Partnerships and other local authority
boards.
7.2 Incorporating the views of business
communities at regional or local levels is based on the underlying
assumption that they are both willing and able to
engage—factors that are highly variable across business
organisations and geographical territories. The sector is diverse,
does not always speak with a unified voice and the selection and
benefits of proxy representation on sub-national partnerships
are not always clear to members of business associations.
7.3 There is a commonly held view among
business leaders that if they are to become more active in partnership
working, including LEPs, more inventive ways of engaging the sector
are required, with streamlined procedures that avoid the need
to review lengthy documents and attendance at drawn-out meetings.
As volunteers, business partners do not want to be part of bureaucratic
"talking shops". Nonetheless, LEPs will face the dilemma
of having to balance their business orientation with a complex
array of social and environmental issues. It remains to be seen
whether they can combine serving and listening to the local communities
they represent with providing the dynamism, creativity and propensity
for change that private sector leaders desire.
8. THE LOCAL
EVIDENCE BASE
8.1 From April 2010 all upper tier and unitary
authorities, in consultation with other key partners, were required
to assess the economic conditions in their local areas, which
would provide the evidence to underpin a range of local and regional
strategies. In July 2010, however, the Government announced its
intention to remove statutory guidance on Local Economic Assessments
(LEAs). Local authorities are still required to have a local economic
evidence base. Nevertheless, "without statutory guidance
there is nothing to say what a LEA should contain, when
it has to be completed or how it should be used to
inform policy" (South West Observatory, 2010). A thorough
evidence base is vital in the identification of LEP priorities.
Second, LEAs may form the basis for applications for Regional
Growth Funding and assist Whitehall in judging the needs of different
localities. Third, evidence will be required to gauge the success
or otherwise of LEPs and to compare performance between areas.
8.2 The evidence base and intelligence used
to identify local priorities should relate to LEP areas. Where
these are coterminous with single counties or unitary areas this
should be relatively straightforward. However, where LEPs comprise
areas that cross local authority boundaries and where authorities
collate, analyse and present data in different ways, this condition
may prove difficult to meet. The capacity of local authorities
to undertake this task will vary considerably depending on existing
data and analysis, established partnership arrangements, available
resources and expertise and local circumstances. With no new resources
attached to carry out this function, there is a danger that the
quality and rigour of evidence gathering may be jeopardized, undermining
policy formulation.
8.3 Since the McClean report (2003) considerable
efforts have been made to improve regional statistics and evidence
in a bid to inform policy and government spending decisions. For
example, Regional Funding Allocations (RFAs), introduced in 2005,
were intended to "enhance regional input into government
policy development, showing how such priorities relate to each
other to form a coherent, credible and strategic vision for improving
the economic performance of regions; and how these priorities
are aligned to resources" (HM Treasury et al., 2005,
p. 3). This exercise required regional partners to generate a
comprehensive evidence base about conditions, needs and priorities
across core policy areas, including economic development, housing,
transport and skills. A key question will be the extent to which
LEPs will harness this valuable work. To begin with a clean slate
would be a huge waste of resources.
9. SUMMARY
It is asserted that Local Enterprise Partnerships
offer a more effective and accountable approach to sub-national
economic development, but their introduction carries risks for
the delivery of key policies:
9.1 There is little evidence that LEPs will have
the powers and resources to assist in reversing the longstanding
disparity in economic growth rates between the Greater South East
and the rest of the country.
9.2 The adoption of LEPs can be seen as a means
of instilling greater local accountability for economic development,
but they will have limited statutory authority and will lack visibility
and accountability to citizens.
9.3 LEPs will be expected to devise solutions
to meet their localities' economic priorities but given their
reliance on multiple funding streams administered by a plethora
of government bodies, whose own budgets are threatened, their
room for manoeuvre will be restricted.
9.4 Strengthening collaboration at the sub-regional
level can be seen as a way of assigning decision-making to a spatial
level that more accurately reflects socio-economic realities.
Nonetheless, in the absence of elected sub-regional authorities,
this will depend upon voluntarily agreements, with the risk of
significant geographical variations and fragmented policy and
support for economic development.
9.5 The legacy of regional economic development
knowledge and expertise should not be dissipated. Indeed, because
there are economic opportunities and challenges that cannot easily
be dealt with either nationally or locally, there is a compelling
case for establishing region-wide partnerships of local authorities,
business leaders and other key partners to deal with strategic
economic issues.
9.6 Measures need to be in place to ensure that
European funding can continue to be drawn down and that local
areas maintain their participation in EU public and private sector
networks.
9.7 Granting business interests an equal status
with local authorities in LEPs may lead to undue prominence being
given to economic considerations and may be incompatible with
local authorities' remit to deliver sustainable development.
9.8 It cannot be assumed that representatives
of the business community will be both eager and qualified to
engage in the work of LEPs. Indeed, some may find the task of
dealing with multiple objectives burdensome in a public and accountable
setting.
12 August 2010
|
