Written evidence from University of Lincoln
The University of Lincoln wishes to offer the
following views and evidence in response to the topics below which
are separately identified in your call.
The functions of the New Local Enterprise Partnerships
(LEPs) and ensuring value for money
The new LEPs could and should become important
and effective vehicles for implementing government policies to
rebalance the economy. This can be defined in various dimensions
including private sector growth to replace reduced public sector
activity, high productivity business activities replacing lower
productivity businesses lost in the recession and a more optimal
geographical spread of employment and production.
Properly implemented the LEPs will co-ordinate
the economic development activities of multiple local authorities
across functional economic areas (city-regions, rural areas etc).
By functional economic area we mean a geography which makes sense
in terms of mutually supporting economic activities and linkages
and where possible having an identity which is recognised by people
inside and outside of the LEP area.
The new LEPs will provide opportunities to engage
business, local authority and third sector leaders in common pursuit
of economic, social and environmental advancement of defined sub-national
areas. We have some concerns at this early stage in the development
of LEPs that important decisions about the geographical boundaries
and extent of LEPs are being negotiated almost exclusively by
local authorities with other potential partners merely being informed
of "progress". We trust that this balance of influence
will be addressed in due course, but suggest to the Committee
that this is a serious issue which you may wish to consider.
In these straightened times it will be even
more essential than in the past to achieve excellent VFM through
clearly defined government objectives for LEPs and scrutiny of
proposals to form LEPs. In due course LEP bids for resources,
for example through the Regional Growth Fund, will need to be
rigorously appraised—not only to ensure local objectives
are met efficiently and effectively, but also that returns are
maximised across the nation.
The Regional Growth Fund, and funding arrangements
under the LEP system
The strategic objectives of the Regional Growth
Fund dictate that it should support projects which can demonstrate
that they will stimulate private sector growth and employment
creation. This suggests that funding should be concentrated on
projects which:
Both have a role in meeting the Fund's objectives,
but have different problems associated with them. Supporting existing
businesses to expand carries a particular risk of deadweight loss
as they may expand without intervention and there is a potential
conflict with state aid regulations. This can be circumvented
to some extent if funding is directed into hard or soft infrastructure
projects creating an enabling environment which develops private
sector capabilities. The challenges in securing growth from entrepreneurship
and new business formation are to avoid displacement effects on
fragile existing businesses and to encourage the formation of
good quality businesses which can survive, grow and spread prosperity.
Cross-cutting themes such as creating the low-carbon
economy could be incorporated into funding priorities but these
should not be too prescriptive or the effectiveness in creating
growth and jobs might be blunted.
The criteria for funding support, particularly
relating to dependency on the public sector could inadvertently
create an urban policy bias. The Regional Growth Fund should also
stimulate private sector growth in rural areas which have their
own particular challenges and constraints on growth frequently
causing them to lag behind more prosperous city-regions. This
does not just involve disparities in GVA. Rural areas also tend
to suffer from poor service provision which could easily become
more acute as deficit reduction begins to bite, undermining the
viability of whole communities.
Government proposals for ensuring co-ordination
of roles between different LEPs
First and foremost is the necessity to define
an optimal geography of LEPs. This would require that all areas
with sufficient need for LEP coverage are located in one. Secondly,
that local authority areas are configured into LEPs that have
functional logic—particularly relating to scope to rebalance
the economy through private sector growth. The initial alignment
of local authorities into LEPs has been locally proposed and lacking
in higher level co-ordination. Whilst this may be good in terms
of local democracy it risks a distribution of LEPs emerging which
leaves some areas, particularly those very peripheral to city-regions
lacking in scale and functional economic coherence.
In terms of funding which the LEPs (and partner
members) might be eligible to access we support the view that
there should be different allocation mechanisms for different
purposes. The Local Enterprise Partnerships (LEPs) will clearly
be an important vehicle for channelling funds into projects which
have maximum impact on private sector growth and job creation.
They will have detailed local knowledge of what is needed in their
geographical area and will have a good mix of private and public
sector representation conducive to effective decision-making.
LEPs should be required to produce coherent plans for their use
of the Regional Growth Fund against which individual proposals
can be judged. However there will be some large capital projects
which address national needs or have impacts significantly beyond
LEP boundaries—justifying separate allocation mechanisms
operating outside the LEPs, potentially on a national scale.
Arrangements for coordinating regional economic
strategy
Given the demise of regional development agencies
it is not clear who would draw up regional economic strategies.
In some areas of the UK (eg the East Midlands) the standard region
is not a meaningful functional economic area. It is therefore
questionable as to whether regional economic strategies are needed
except where LEPs are so linked by common agendas as to make a
co-ordinated approach desirable.
Current direction of government policy seems to point
towards focus on the UK macroeconomic level and on sub-regional
LEPs. The devolved administrations offer scope for regional strategy
making in Scotland, Wales and Northern Ireland. No such counterpart
will exist in England and it is questionable whether the cost
of establishing new regional quangos could be justified. To the
extent that England needs regional policy this should be shaped
by BIS and delivered by LEPs or groups of LEPs invited to work
together in partnership for impact across broader geographical
areas which share common challenges. These arrangements could
be fluid with different groupings of LEPs invited to address different
problems.
Structure and accountability of LEPs
Of all the potential structural models for LEPs
two stand out as being most likely to meet appropriate requirements:
(i) A local authority as a lead/accountable body.
This would be most appropriate where there is one large local
authority (eg a County Council) and other smaller local authority
participants (eg district councils—including some drawn
from other county areas to form a logical functional economic
area) plus private sector and third sector participants. It may
also be a popular model if there is no specific funding available
to cover the operating costs of a free-standing LEP with separate
legal status. In this model partners external to the lead body
would have advisory status though this could be given teeth by
requiring funding bids to be signed off by the consultative board.
(ii) A free-standing, single purpose LEP with accountable
body status. This would be particularly appropriate in large LEPs
with multiple upper tier local authority participants as well
as district councils, private sector, third sector and other public
sector partners. Even if central government funding for LEP operating
costs is absent there may be an economy of scale argument in the
partners funding a light-touch secretariat employed within a limited
company structure and governed by directors drawn from across
the membership. This has been a common model in the era of RDA
funding of sub-regional partnerships but may be more rarely implemented
in the absence of such support.
One essential characteristic is that the LEPs
should be genuine partnerships giving a spread of influence on
decision making across different sectors. If control is concentrated
in the hands of one or two authorities with only lip-service paid
to consultation this would be a retrograde step. The committee
may wish to consider how genuine partnership arrangements can
be assured.
The legislative framework and timetable for converting
RDAs to LEPs, the transitional arrangements and the arrangements
for residual spending and liability of RDAs
The University does not have particular expertise
in this field. We believe, however, that now the RDAs have effectively
been consigned to past history it is in the interest of the country
that the new LEP structure is put in place as soon as possible
to avoid a policy vacuum at a difficult time when economic recovery
is still fragile. We appreciate that RDAs will need to be preserved
as legal entities for a short period to manage transitional and
contractual arrangements and defer to others to determine how
this should operate.
Means of procuring funding from outside bodies
(including EU funding) under the new arrangements
In these difficult times of constrained resources
for sub-national economic policy it is imperative that relevant
funding from the EU is maximised and well managed. This will be
more difficult under the new LEP arrangements with the corollary
of much reduced administrative resources at regional level in
government offices and RDAs. Equally the constraints on public
expenditure which will accompany deficit reduction will potentially
reduce capacity for match funding. These are serious issues which
will need to be addressed.
13 August 2010
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