Written evidence from the New Local Government
Network (NLGN)
NLGN has been at the forefront of debates about
sub-national governance for many years. We are an independent
not-for-profit think tank that seeks to transform public services,
revitalise local leadership and empower local communities.
Along with our academic partner the Institute for
Political and Economic Governance (ipeg) at The University of
Manchester, NLGN hosted the MAA Forum from 2008 to 2010. This
brought together local partnerships from across the country and
acted as a independent joint resource to give momentum to Multi-Area
Agreements and wider sub-regional policy development. In early
September we will be launching an Enterprise Partnerships Forum
to influence sub-national policy in Whitehall, co-ordinate national
policy discussions, provide practical peer-learning and networking
opportunities and develop new thinking on Local Enterprise Partnership
policy.
We welcome this timely inquiry into the new
LEPs being carried out by the Business, Innovation and Skills
Select Committee and we are grateful for the opportunity to set
out our thinking and recommendations.
1. Executive Summary
1.1 We do not have a homogeneous economy
in this country. We live in a series of highly varied economies
with different assets, histories, business groupings, industrial
strengths, infrastructural weaknesses and employment and skills
challenges. "Natural economic areas" as they are known—the
places people live, work, travel and shop—tend to have a
sub-regional footprint. Current administrative boundaries, whether
regional or local, rarely capture these natural economic areas.
1.2 Top-down redesign of organisational
structures can be time consuming, costly and disruptive, and so
what is needed is a more organic process of individual councils
coming together and collaborating across boundaries. In the same
way that public services should be far better tailored around
the citizen, governance should much better reflect the economic
footprint of places.
1.3 NLGN believes that Local Enterprise
Partnerships have the potential to provide the strong, decisive
and strategic economic leadership needed at the most appropriate
spatial level. Streamlined and integrated governance, with strong
business involvement and a clear golden democratic thread could
help to drive economic growth, rebalance economies and make places
more competitive and sustainable in challenging global conditions.
1.4 The success of LEPs will depend on the
powers and freedoms they hold. Without a clear identity giving
them some autonomy from their members and the ability to tailor
policy and direct investment based on local circumstances, LEPs
will become underutilised and ultimately ineffective. Moreover,
buy-in from the private sector and locally elected leaders will
be sub-optimal and a rare opportunity to make a decisive move
away from "business as usual" will have been missed.
1.5 The local barriers to collaboration
across local authority areas should not be underestimated: managing
fears about loss of sovereignty, bridging political divides and
diverting resources from more parochial activity are major obstacles
that local authorities will have to overcome. This is where a
"pain versus gain dynamic" comes into play. Without
real and meaningful devolution of functions from the regional
tier and greater flexibility from Whitehall, progress towards
LEPs would risk being slow and stunted, which in turn would risk
delay or failure in achieving the goals which LEPs are intended
to support, such as local economic renewal and growth.
2. The functions of the new Local Enterprise
Partnerships and ensuring value for money
2.1 LEPs must hold a broad range of functions
if they are to be able to make a difference on the ground. LEPs
offer the opportunity for a far more integrated, streamlined,
fleet-footed, locally-responsive and strategic approach to driving
economic growth. Cutting out fragmentation, duplication and traditionally
siloed policy approaches could deliver substantial immediate savings
and ensure far better value for money over the longer term.
2.2 NLGN has been calling for many powers to
be made available to partnerships of local authorities over recent
years. These include; commissioning of a single and integrated
programme of welfare to work; greater steer of skills funding
to match local economic priorities; strategic transport functions;
a single capital pot for economic development and regeneration;
and business rate flexibility and Tax Increment Financing options
to widen investment opportunities in pro-growth infrastructure.
The ability of LEPs to rebalance economies and drive economic
growth will be constrained if these kinds of policy functions
are not granted.
2.3 We are concerned that some key functions
currently held by Regional Development Agencies, for example business
support, inward investment and key sector development, will be
sucked up to the corridors of Whitehall, rather than devolved
to LEPs. Moreover, there are fears that BIS and CLG do not have
the cross-cutting influence in Whitehall to secure the level of
commitment to the LEP agenda that is needed from other departments,
such as HMT, DWP, DFT and DFE.
2.4 Therefore we recommend that the devolutionary
spirit of Government's Programme for Government should be captured
in a new "duty to devolve". Where a LEP wishes to have
particular flexibilities and powers to drive economic growth they
should be granted if the LEP has a firm evidence base to support
that they are operating at the right spatial level; has a strong
case for why the desired functions are needed; can demonstrate
partners have the necessary commitment; can give reasonable assurances
that they have sufficiently robust governance in place; and if
central government departments are unable to give a more compelling
reason why they should not be granted.
2.5 Government Departments are currently
"judge and jury" when it comes to devolution and are
open to the charge that they are insufficiently impartial and
too institutionally protectionist to make a judgement about whether
they should grant new freedoms. Therefore we recommend that where
a LEP feels that Whitehall is not being sufficiently co-operative
in negotiations or is unwilling to grant them the flexibilities
and powers they believe necessary, there should be a mechanism
for arbitration. Such an arbitration system could also extend
to questions of defining the area of geographical influence of
a LEP, in the event of disagreement about this between Whitehall
and proposed LEP members.
2.6 We ask that the BIS Select Committee,
or another third party, act as an impartial arbiter in such cases.
The committee could take evidence from departmental civil servants,
Ministers and LEP representatives, and seek expert opinion (such
as economists and business leaders) if necessary, when arriving
at a final informed judgement.
3. The Regional Growth Fund, and funding
arrangements under the LEP system
3.1 We welcome the government's commitment
that the Regional Growth Fund will "encourage private sector
enterprise by providing support for projects with significant
potential for economic growth and create additional sustainable
private sector employment"; and "support in particular
those areas and communities that are currently dependent on the
public sector make the transition to sustainable private sector
led growth and prosperity".
3.2 The government is currently consulting
on the fund and has proposed allocating "a proportion of
the fund on a bid basis" and sets out a number of criteria.
We strongly recommend an outcome-based approach to the bidding
process, where there is no prescription from Whitehall about how
LEPs will have to go about achieving these goals. A non-bureaucratic
and permissive approach will allow locally tailored solutions
and represent a welcome departure from costly top-down micro-management,
which has defined too many programmes in previous years.
4. Government proposals for ensuring co-ordination
of roles between different LEPs
4.1 Co-ordination between LEPs should be
organic, with LEPs doing so where they decide it will add value.
Aligning activity and co-operating on particular issues across
different LEPs where appropriate would be mutually beneficial
for local authorities. However, ensuring co-ordination of roles
through centrally designed blueprints for LEPs would risk thematically-driven
roles. We would strongly warn against this and recommend a more
responsive and organic approach developed from the bottom-up,
by means of encouragement (and where appropriate, incentivisation)
rather than prescription.
5. Arrangements for co-ordinating regional
economic strategy
5.1 Where local authority leaders feel there
is added value in having a residual regional body for co-ordination
of economic strategy, central government should not prevent them
from doing so. It may be decided that some functions, such as
co-ordinating major regional transport schemes and maximising
resources allocated to the region for example, sit best at the
regional spatial level.
5.2 Importantly, any residual body should be
owned by and have clear lines of democratic accountability to
the local authorities in the region. Any regional structure should
only hold functions that the local authorities have delegated
to it.
6. Planning and housing functions of LEPs
6.1 It is not clear whether it is intended
for LEPs to have a forward planning role (considering/influencing
the development which should take place in their areas), or whether
they would actually be given a development control function. It
is anticipated that if LEPs are intended to have a role in production
and promotion of the development plan for their area, this is
one way in which progress towards achieving their objectives (to
create the right environment for business and growth) could be
made. If LEPs do not have a separate legal status, any LEP planning
functions would need to be woven into those extant functions of
other planning bodies (eg: local authorities), which would add
another layer of control to an already highly complex legislative
system.
6.2 However care must be taken to ensure that
other local level bodies are not excluded from the planning decision-making
process by giving new powers to LEPs. A fractured approach, where
local level authorities are operating competitively rather than
collaboratively, will not provide a robust planning system.
6.3 It is important to have a clear lead
on who is preparing sub-national housing strategy, and what frameworks
will apply to them, without which housing delivery may be frustrated
at a time when it is needed most. It seems to make sense to have
a strong link between housing and planning, and (subject to clarification
of the planning position in 6 above) there is a case for those
functions being carried out by the area's LEP.
7. Structure and accountability of LEPs
7.1 Form should follow function. The more
flexibilities and powers LEPs need and are given, the more formal
and robust the governance arrangements will have to be. Proportionality
is essential, with bespoke governance arrangements reflecting
the functions that a LEP holds. We would strongly advocate a bottom-up
and organic process, rather than top-down prescription and imposition
of rigid governance structures.
7.2 It is crucial that any governance arrangement
has a golden democratic thread. Proper involvement of and direction
from business is also important, but this should not take place
at the expense of democratic accountability and legitimacy. Central
government should offer a challenge to LEPs on their business
engagement, but should not be prescriptive about the exact nature
this should take. Many partnerships have already developed governance
arrangements that provide strong democratic legitimacy and accountability
and the buy-in, input and engagement of leading local entrepreneurs.
8. The legislative framework and timetable
for converting RDAs to LEPs, the transitional arrangements, and
the arrangements for residual spending and liability of RDAs
8.1 The pace and radical nature of the reform
planned by the coalition Government has generated significant
pressure on local authorities and agencies. Different areas are
at different starting points and are likely to proceed at different
speeds. However, many areas have well developed partnership working
and governance, with a strong track record of collaboration to
drive economic development, and will form LEPs that will be very
well placed to take on significant powers from Government departments
and quangos.
8.2 Legal status for LEPs might be necessary
to unlock certain powers, funds and flexibilities. In addition,
as individual legal entities, LEPs might be able to make decisions
and carry out actions in a quicker and less bureaucratic way.
More formal statutory arrangements may also help strengthen international
credibility, business credibility and credibility within Whitehall
itself. We recommend that central government should create an
option of legal status for LEPs so that a LEP would have a distinct
legal identity, legislating for their creation if necessary.
8.3 Care should also be taken to ensure
that, if newly-formed LEPs assume responsibility for ongoing funding
liabilities, they have access to funds to enable those liabilities
to be met, to make sure each LEP is not hampered from discharging
its duties by debts which it (in many cases) did not originally
incur.
9. Means of procuring funding from outside
bodies (including EU funding) under the new arrangements
9.1 Some funding, such as through the European
Regional Development Fund, is currently managed by RDAs. A residual
regional body, of some kind, will be needed to ensure these funds
are secured and disruption is minimised. This should be an administrative
body, with any further powers and control delegated to it by local
authorities if they wish. LEPs should play an increasingly influential
role in taking decisions about securing funds at the regional
tier and in deciding how they are allocated within the region.
9.2 LEPs, perhaps with legal status if needed,
would be well placed to manage a range of funding streams that
are currently held by Whitehall and Quangos, such as skills and
welfare-to-work commissioning. Without having broad control over
key funding streams the effectiveness of LEPs in driving economic
growth will be severely constrained.
10. Conclusions
10.1 Many local authorities' geographies
are not natural economic areas and their boundaries do not capture
the activity of citizens and businesses, in the same way that
regional boundaries failed to do so. Although patterns of economic
activity are often blurred and fuzzy, LEPs should be built on
a detailed understanding of the local economy and a firm evidence
base, rather than pure administrative convenience. Travel-to-work
patterns, business clustering and markets for goods and services
are just some of economic footprints that could be considered
when forming LEPs.
10.2 Challenge should be provided to local
authorities forming LEPs so that they have to provide a strong
evidence-base for why they are best placed to take on powers and
flexibilities. Where local authorities feel that central government
is moving beyond challenge and is simply offering unjustified
resistance to the formation of, or devolution of powers to, a
LEP there should be the ability to appeal to a third party (see
previous points 2.4, 2.5 and 2.6).
10.3 LEPs will be sub-optimal if they fail
to match economic geography, if they fail to have strong democratic
governance and business involvement and if central government
fails to have the tools they need to make a difference. With the
Coalition Government's plans for significant reductions in public
spending, as part of a radical programme of fiscal consolidation
over this Parliament, communities cannot afford for such failures
to be made. If done right, LEPs will be well placed to perform
the vital role of delivering the investments, infrastructure and
interventions needed to steer a wide variety of places through
challenging economic times.
13 August 2010
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