Written evidence from Institute of Chartered
Accountants in England & Wales (ICAEW)
INTRODUCTION
1. The ICAEW welcomes the opportunity to
comment on the Business, Innovation and Skills select committee's
inquiry into Local Enterprise Partnerships (LEPs).
WHO WE
ARE
2. We draw on our technical expertise and
the experiences of our members to assist policymakers. ICAEW operates
under a Royal Charter, working in the public interest with governments,
regulators and industry to maintain the highest standards. We
represent and support over 134,000 members in more than 160 countries,
across every sector and size of firm, in business and practice.
In the UK our members are cited by businesses as their most trusted
advisers, working across every region and across all sectors.
EXECUTIVE SUMMARY
3. LEPs should have a clear focus on driving
local economic growth.
4. LEPs should be strongly business-led.
5. LEPs should drive local economic development
by increasing skills, encouraging enterprise, supporting businesses,
and addressing the workforce's needs for housing and transport.
6. In the transition from Regional Development
Agencies (RDAs), institutional memory, contacts and successful
schemes should be retained.
7. We welcome plans to shift some functions
to be nationally co-ordinated, where this will lead to greater
efficiency and less duplication.
8. We should limit the total number of LEPs.
Too many will lead to overlap and difficulties in co-ordinating
their activities.
9. ICAEW has built a library of case studies
of regional business support to inform our guide, "Next Steps
for Business Support", which makes recommendations on how
to set up LEPs.
RESPONSES TO
SPECIFIC TERMS
OF REFERENCE
The functions of the new Local Enterprise Partnerships
and ensuring value for money
10. LEPs' functions should follow on from
that focus on providing a good environment for business to drive
economic growth. This will ensure clear purpose, prevent "mission
creep" into other areas, and help LEPs to use their funding
in an efficient and targeted way.
11. Regional economic recovery can only
be achieved within a framework of national economic recovery and
a local environment where businesses can thrive. LEPs should drive
local economic development by increasing skills, encouraging enterprise
and supporting businesses, as well as addressing the workforce's
needs for housing and transport. As the Conservative party's 2009
"Control Shift" paper argues, RDAs failed to
close the gap in income and productivity between the most developed
and least developed regions in the UK. This should be a key performance
measure of the LEPs over time. We suggest this could be assessed
by the National Audit Office.
12. We welcome the decision that some former
RDA functions will now be carried out nationally, where this will
lead to better co-ordination and greater efficiency. Co-ordinating
access to finance schemes could be more efficiently done at a
national level. Another key example is attracting inward investment.
RDAs competed against each other to attract foreign investment
to their own region. This saw cities outbidding each other, driving
up the cost of subsidies and duplicating activity. We suggest
that UKTI take a central role, co-ordinating efforts to attract
foreign investment, and mapping out any LEP activity in this area.
However, UKTI will need local points of reference and contact
within LEPs.
13. Despite efficiencies made by centralising
some functions, LEPs should not be barred from continuing successful
schemes, or devising new schemes, in most functions. One example
is Yorkshire's financial health check programme, which provided
vouchers for business advice to local enterprises in the downturn.
14. Business Link's regional arms are being
wound up, and it is to be delivered centrally from a website.
This will be a much more efficient delivery method, but LEPs should
be free to offer their own locally-based business support too.
15. LEPs should consider how to make full
use of business advice and networks already provided by the private
sector, rather than duplicating their activities. They should
only intervene where the private sector is not providing a needed
service to local business, or where the private sector prices
out certain kinds of business from accessing that service.
16. To ensure value for money, LEPs should
publish their expenditure and performance information, enabling
public scrutiny. LEPs should also be properly audited. We recommend
that they be audited by the National Audit Office, who audited
RDAs and will be better placed to compare performance between
RDAs and LEPs.
Government proposals for ensuring co-ordination
of roles between different LEPs
17. ICAEW is concerned by reports that as
many as 80 new LEPs may be created, despite initial estimates
that the final number would be around 50. A system with many smaller
LEPs might make co-ordination difficult, be much more inefficient,
create bodies which are too small to undertake valuable projects,
and lead to overlap with the activities of other LEPs. We recommend
that the government encourages local authorities to form fewer
LEPs where there is an economic rationale.
18. We are concerned that the process of
submitting proposals for LEPs is too local authority-led. In areas
which do not apply to establish an LEP, local businesses are disenfranchised
and may in future be disadvantaged compared to businesses in other
areas. This problem will be most acute in areas of low GDP growth
and lower business formation, largely in the Midlands, Yorkshire
& Humberside and the North, where businesses need more support.
The government needs a mechanism to ensure that in areas where
business is not represented by an LEP, some alternative provision
is available to ensure those businesses are not disadvantaged.
Alternatively, it needs to incentivise LEP creation (see paragraph
25).
19. LEPs should operate in a structure through
which they can co-ordinate and co-operate. We recommend that LEP
Chairs meet regularly on a regional basis to report on progress,
share best practice, and plan co-operation.
Structure and accountability of LEPs
20. To operate efficiently and secure the
buy-in and support of local businesses, LEPs should be strongly
business-led. We recommend that they are chaired by local business
representatives, with a significant proportion of business representatives
on their boards, and set priorities according to the needs of
local business.
21. The LEP board should be chaired by a
local business figure, and the board should contain both elected
councillors from participating local authorities, and business
representatives. Board member appointment should be transparent.
The legislative framework and timetable for converting
RDAs to LEPs, the transitional arrangements, and the arrangements
for residual spending and liability of RDAs
22. In switching from RDAs to LEPs, it is
crucial that institutional memory and experience are not lost
in transition. We recommend that those establishing LEPs should
bring in key ex-RDA staff, as well as business representatives
and elected officials, to advise the LEP's establishment and work
programme. ICAEW has gathered a library of case studies recording
successes and failures in business support programmes. Our recent
publication "Next Steps for Business Support" sets out
the lessons LEPs should learn from RDA's experiences and advises
on how LEPs should be established. We recommend a clear focus
on business and economic growth, and meaningful consultation and
partnership with business.
23. In planning their activities and functions,
and setting up the framework for LEPs, it will be crucial to know
the fate and funding of other agencies which make up the system
of business support in England, such as the Technology Strategy
Board. LEPs will need to know what is being done elsewhere in
order to determine which organisations or agencies might offer
support to LEPs.
24. There are two areas where financial
liabilities and asset issues might create problems in the transition
between RDAs and LEPs. The first relates to assets currently held
by the RDAs, such as land acquired for development projects. It
is not clear who will acquire these assets. The second relates
to the ongoing administrative functions of RDAs, particularly
accounting for projects funded by the European Union. RDAs will
have obligations to report back on the use of these funds and
there can be penalties if funds have not been applied in accordance
with State Aid rules. These assets and responsibilities will need
to be transferred with due consideration, particularly as LEPs
may not have the resources or information to do this.
The Regional Growth Fund, and funding arrangements
under the LEP system
25. The funding arrangements for LEPs are
not yet clear. These will be vital in determining the size and
functions of LEPs. We recommend that some funding should be allocated
through a funding formula, rather than solely through a bidding
process. This will ensure LEPs can establish themselves successfully,
and provide an incentive to create LEPs, minimising the chance
of some areas not creating an LEP. We await details in the forthcoming
White Paper or in the Comprehensive Spending Review.
Arrangements for co-ordinating regional economic
strategy
26. Some issues, such as transport, will
need regional co-ordination. As the Regional Government Offices
are also being abolished, co-ordination of transport will either
be a national level within the Department of Transport or more
locally. We recommend that one LEP within each region could be
"lead LEP" on a particular issue such as transport.
For a transition period, whilst LEPs become fully operational,
some RDA functions might be housed within a "lead LEP".
10 August 2010
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