Written evidence from the British Chambers
of Commerce
INTRODUCTION
1. The British Chambers of Commerce (BCC)
welcomes the opportunity to respond to the Business, Innovation
and Skills Committee's inquiry into the Government's proposal
to establish Local Enterprise Partnerships (LEPs) for economic
development in England.
2. The BCC is a powerful and influential
network of 55 Accredited Chambers across the UK. No other business
organisation has the geographic spread or multi-size, multi-sector
membership that characterises the Chamber Network. Every Chamber
sits at the heart of its local business community, providing representation,
services, information and guidance to member businesses and the
wider local business community.
3. While there is a wide array of views
within the Chamber Network on the appropriate structures for sub-national
economic development in England, the BCC and its member Chambers
are committed to making LEPs work. We are also committed to ensuring
that the wealth-generating private sector plays a pivotal and
central role in delivering comprehensive and transformative economic
change in towns, cities and counties across the UK. LEPs, fundamentally,
must be about challenging the status quo—and creating a
stronger enterprise culture in local areas across the UK.
4. Accordingly, the BCC has been working
with Ministers, Whitehall and town halls on the transition to
LEPs. In recent weeks, we have:
— Set out what LEPs should aim to achieve:
productivity growth, private-sector wealth creation (which in
turn generates jobs), and local economic diversity. Each area's
journey to achieve these will be different. This has been shared
with ministers and Whitehall by the BCC, and used by individual
Chambers of Commerce to structure debate in their local areas
[see slides attached];
— Actively assisted Chambers of Commerce
and Local Authorities in a number of areas on locally-specific
proposals for transformative economic growth. This process of
engagement has included everything from private meetings with
local leaders to business summits with 200-plus in attendance;
and
— Worked with the leadership of the Local
Government Association to ensure that LEP proposals are developed
as real public-private partnerships, rather than just a public-sector-led
approach.
5. Given the extensive track record of Chambers
of Commerce and their members in driving local economic development
we are confident that Chambers will continue to play a central
role in the implementation of LEPs. We stress, however, that LEPs
must be transformative—with an innovative and clear vision
for local economic change, driven jointly by private and public
sector actors. If LEPs simply become a new vehicle for "business
as usual", either as consultative talking-shops or day-to-day
delivery bodies, they will fail to deliver the fundamental shift
toward private-sector-led growth that so many areas across England
require. This response therefore deliberately focuses on purpose,
structure, and strategy, and responsibility for setting funding
priorities—rather than on delivery. The BCC believes that
delivery will require a mixture of bodies—with the private
sector involved as far as possible—but that the mix will
differ from area to area.
THE FUNCTIONS
OF THE
NEW LOCAL
ENTERPRISE PARTNERSHIPS
(LEPS)
6. The BCC is concerned that discussion
on the functions of LEPs has preceded careful thinking about why
they are being created in the first place. LEPs must have
a clear purpose from which their functions, geography, and governance
arrangements logically flow. As noted above, LEPs' fundamental
role must be to set out a clear long-term vision for the growth
of the private sector across a clearly-defined geographic area—which
would remain even if the structures developed by the LEP approach
are reformed by future Governments. This vision should be accompanied
by a short-term delivery plan that emphasises pragmatic, achievable
actions by public and private sector bodies operating on the ground.
While LEPs may set that delivery plan, they need not necessarily
be the day-to-day delivery bodies. In fact, LEPs should be "strategic
commissioning bodies"—rather than direct delivery agencies.
7. In each area of England, the BCC believes
that LEPs should develop their own tailored proposals to:
— Raise local productivity levels;
— Increase private-sector wealth creation
(which should, in most areas, translate into jobs growth); and
— Deliver greater economic diversity (in
areas that are over-dependent on a single sector for growth) and
sustainability (in all areas, including those that have been relatively
successful at delivering private-sector growth in recent years).
8. To achieve these objectives there are
some clear functions that LEPs should co-ordinate to improve the
local business environment. Setting a small number of clear functions
will demonstrate LEPs' value to local businesses, who are often
rightly sceptical of new governance arrangements and initiatives.
Key functions should be to focus on:
— Setting a clear, shared long-term vision
for enterprise growth for their area—including a realistic
analysis of the area's comparative advantages and its opportunities
for private-sector growth. This must not be a repeat of the experience
with RDAs, which identified far too many "comparative advantages",
many of which were unrealistic and unspecific (eg the oft-cited
aspiration to create biotech and creative industries sectors,
which featured in every RDA strategy);
— Identifying existing barriers to business
growth—eg in terms of land use planning, infrastructure,
skills/labour market—and the actions required to remove
these barriers; and
— "Selling" the area, by taking
responsibility for bids for central government funding (eg the
Regional Growth Fund) as well as levering in private sector resources
to support priority local infrastructure projects.
9. The lack of clarity about LEP functions
is also hindered by Ministers' reticence to publicly set out the
criteria they will use for determining which LEP proposals will
be given the go-ahead. While we do not believe that a prescriptive
and top-down approach is required, business wants an assurance
from Ministers that no LEP will go ahead unless its purpose is
to address the core economic priorities described above. Business
also wants to be assured that critical government departments
beyond CLG and BIS, such as DfT and DWP, are fully "bought
in" to this approach. Otherwise, it is possible we could
have LEPs approved which are simply not credible propositions.
10. We believe Ministers should make it
clear going forward that they will not approve LEP proposals that:
— Do not have the local business community
at the heart of their development, and are supported by businesses
and respected business organisations in their areas, including
Chambers of Commerce;
— Are not of an adequate size or scale
to reflect genuine functioning economic areas (rather than existing
local political boundaries). We would suggest no more than 40
LEPs to ensure appropriate scale;
— Are seeking a very broad number and range
of functions which lack a clear relationship to the LEP's core
economic role; and
— Are based on unrealistic resource expectations.
THE REGIONAL
GROWTH FUND,
AND FUNDING
ARRANGEMENTS UNDER
THE LEP SYSTEM
11. While the BCC supports some of the principles
articulated in the Government's Regional Growth Fund consultation—including
a focus on transformative capital investments, and a more open
bidding process that allows for private-sector as well as local
authority involvement—we also have concerns regarding the
proposed approach. We have attached the BCC's draft response
to the Government consultation response on the Regional Growth
Fund, which explains our rationale in further detail.
12. We believe that the project funding
approval process should:
— Be based upon the three core objectives
we have set out for LEPs (as above);
— Prioritise public/private bids that will
improve the local business environment, with a particular focus
on transport infrastructure, premises, and skills (only in those
cases where existing skills initiatives are failing to deliver
against business needs); and
— Support bids which will deliver high
levels of absolute growth (eg in the South), as well as bids that
enable greater private sector diversification in areas of the
country that have become over-dependent on the public sector (eg
the Midlands and the North).
13. The BCC believes that the Fund must
be a long-term initiative, rather than simply a two-year grant-making
scheme. It would be incongruous for the Government to have different
cycles for the Regional Growth Fund, local government finance
settlements, and its Council Tax and Business Rate Bonus schemes—as
this would help areas to maximise the impact of public money.
If the Fund proves successful, and is able over time to offer
returns on loans and equity investments, the Fund could expand
to include private-sector capital (eg from pension funds) and
local authority investments (eg from reserves, of which there
are tens of billions in council accounts).
14. The Fund could also be the vehicle for
bidding for and delivering European Union competitiveness funding
from 2013 onward. We make further comments on EU funding in section
27 below.
15. Given the limited resources available
through the Regional Growth Fund, and the need to focus its resources
on a relatively small number of capital projects, we do not believe
that LEPs should expect significant grants from the Fund for their
revenue operations. As local government revenue funding will continue
to be squeezed over the medium-term, LEPs must be realistic about
the scale of resource available—and both councils and
local businesses will have to find innovative ways to contribute
staff time and resources in a way that maximises value for money.
It is therefore critical that:
— LEPs look carefully at the possibility
of "under-arching" support structures—pooling
resources and sharing functions where appropriate;
— Ministers veto LEP plans based on unrealistic
resource expectations; and
— LEPs make use of available private sector
capacity, as well as the information and experience gathered by
RDAs prior to their dissolution.
GOVERNMENT PROPOSALS
FOR ENSURING
CO-ORDINATION
OF ROLES
BETWEEN DIFFERENT
LEPS AND
REGIONAL ECONOMIC
STRATEGY
Co-ordination across LEP areas
16. The Government's stated desire to devolve
power away from the centre over the course of this Parliament—including
the abolition of RDAs, regional planning, and the Government Offices
for the Regions—means that LEPs will become the key intermediary
between Whitehall and Town Hall in the years to come.
17. However, our experience to date suggests
that a "patchwork quilt" of LEPs is likely to emerge
over the coming months—with focused and effective partnerships
in some areas, less-effective LEPs in other areas, and still further
areas with no LEP at all. This variation means that clarity
over the division of labour between central government, LEPs,
and any other economic development bodies must be delivered over
the coming months.
18. Businesses want LEPs to be of sufficient
scale to avoid the need for a wide range of coordinating structures
between them. We accept, however, that LEPs should work together
across their boundaries on a mutually beneficial project basis.
This could be for transport projects linking multiple centres,
(eg the connection between Manchester and Leeds or road connectivity
between Dorset and other parts of the South West), to collect
important economic data, or to focus on particular inward investment
interests (eg renewable energy in Norfolk/Suffolk, or advanced
manufacturing in the West Midlands). Such activity might vary
in form from informal close-working to a more formalised contractual
basis, but should not require the creation of additional branded,
overlapping structures that are difficult for businesses to understand.
Functions to be nationalised
19. In their June letter to local councils
and business leaders, the Secretaries of State for Business and
Communities specified that a number of activities previously administered
regionally will now be nationally-led, including international
trade support, inward investment, innovation, sector development,
major infrastructure, European funding, access to finance, business
support, and tourism.
20. There is significant discontent in the
Chamber Network about the "nationalisation" of some
of these functions—with local business leaders stating a
clear preference to retain certain functions at a sub-national
level in some areas. Many Chambers in the North and Midlands (including
the North East, North-West and Yorkshire and the Humber) believe
that there is a continued need to retain control over some of
the strategic economic functions presently exercised by RDAs,
notably around inward investment and place-marketing. Similar
points have been made in the South West, particularly with regard
to tourism. And a number of areas commented on international trade—and
expressed concern that "nationalisation" of this agenda
could work to their area's detriment.
21. Enabling sub-national co-ordination
and delivery of certain functions where there is a compelling
case should not, however, stretch to the maintenance of regional
offices overseas—which the BCC commented on in a previous
appearance before this Committee. It would be preferable to have
a single "sales force for UK plc" overseas that fully
understands regional opportunities and niches.
22. Whilst there is not a clear consensus
in the Chamber Network regarding the functions that should be
"pan-regional" and the functions that could be "nationalised",
it is important that areas are given the opportunity to co-ordinate
functions where there is a consensus that they are needed. Government
should not pre-determine what functions be centralised, but allow
LEP bids to demonstrate capacity for delivery of certain functions
at sub-national level and to commit to delivering certain outcomes
for both their own area and UK plc by doing so. Government should
then approve or reject these proposals on their merits, taking
into account the need to ensure LEPs collectively do not engage
in wasteful competition.
THE STRUCTURE
AND ACCOUNTABILITY
OF LEPS
23. It is important that LEPs are strategic
bodies, which set an economic vision and delivery plan for their
areas. With limited resources, they will require a chair, a board
structure and a small secretariat, but should not hold statutory
functions to fulfil this remit. They could, however, hold responsibility
for transferred assets, and for submitting funding bids—so
that the public-private partnership takes the lead in prioritising
economic development resources.
24. LEPs need to unlock the economic dynamism
and enterprising spirit in local communities and bring in real
business experience and representation into the heart of their
decision-making. Equally local authority leaders will need to
be more strategic in many areas—and work across a geographic
area that represents a functional economy, rather than the ward
or council area that they were elected to represent. The BCC therefore
believes that:
— LEPs should set the economic strategy
for the area, with local authorities responsible for the delivery
of any statutory functions on the ground. They may also lead bids
for funding, and/or be accountable for certain assets or funding
streams being used in the sub-region. Local private sector companies
could also play a key delivery role.
— LEP Boards must be chosen in an open
and transparent manner. They must have at least 50% private-sector
members, a respected and high0level business chair, and they must
be chosen to ensure that each area's most dynamic and visionary
businesses are represented. In order to ensure that business members
enjoy the support of their peers, it may in some cases be possible
to 1) require nominations to be seconded by a representative sample
of local businesses, and/or 2) subject these nominations to a
"business vote" of some sort, with electors drawn from
Chambers of Commerce and other business representative organisations
active in the area.
— In order to ensure that LEPs are considered
the top economic strategy bodies for their areas, council leaders—not
back-benchers—should be the public-sector representatives.
No alternates should be allowed. This will give the business community—which
is often sceptical of the value of new partnership structures—greater
confidence to engage.
— LEPs must put in place rigorous processes
to review their own performance in progressing towards meeting
their delivery plan outcomes.
THE LEGISLATIVE
FRAMEWORK AND
TIMETABLE FOR
CONVERTING RDAS
TO LEPS,
THE TRANSITIONAL
ARRANGEMENTS, AND
THE ARRANGEMENTS
FOR RESIDUAL
SPENDING AND
LIABILITY OF
RDAS
25. The speed at which the Government is
moving towards converting from RDAs to LEPs represents a big change
of pace for both business and local authorities. Many are concerned
that the short timeframe for LEP proposals, the Regional Growth
Fund and the Decentralisation and Localism Bill run the risk of
creating a system that has not been well thought through. For
what are likely to be major changes to a whole range of functions
that will affect business, there is a need to take time to get
this process right, rather than rushing to get it done quickly.
Businesspeople are enthusiastic to engage—but given the
inherent time and resource pressures they face, the timeframe
is proving challenging.
26. There is also a real risk that during
the transition period will there will be a policy and delivery
vacuum at the sub-national level. As RDAs are wound up it is probable
that the capacity, staff, expertise and information that they
have built up will gradually wane, with little more than a skeleton
service available by the time of their abolition. Government should
set out a more detailed public timetable for the transition, and
proposals for how capacity gaps will be managed prior to the new
arrangements being in place.
27. The Government needs to set out how
existing assets, liabilities and spending commitments will be
managed during the transition. Where RDA assets are not deemed
to be strategic national assets, LEPs should be given first refusal
on taking on ownership, provided they can demonstrate capacity
to manage them and to generate sufficient returns. This would
then create revenue streams to support major projects and to lever
in private sector investment. Given the lack of public funding
likely to be available to LEPs, it would be a missed opportunity
for the value of the sites to go back to HM Treasury when it could
be used to help unlock local economic development.
28. As a matter of urgency, the Government
must also set out arrangements for an orderly transition of existing
European funding programmes. This is a major cause for concern
expressed by business leaders in many areas of the country—where
private-sector investment is often contingent upon the completion
of EU-funded projects, and in some cases RDA match-funding. For
example, the North West Development Agency have already cancelled
a planned development for business office space in Liverpool,
and £250,000 support for a business to move into to new premises
in Cornwall has also been pulled. A lack of clarity on transition
arrangements for EU funding programmes could jeopardise resources
during the current Budget period, and complicate the UK's position
for the negotiation of the new 2013-19 EU Budget round.
CONCLUSION
29. The overall BCC position is therefore
as follows:
Overall Summary of the BCC position
Chambers of Commerce are excited to play a central
and proactive role in LEPs—but our business members are
clear that they must be transformative bodies, focused on delivering
enterprise growth. They must be a real partnership led by the
private sector.
Too much of the discussion on LEP functions has
preceded careful thinking about their purpose. Chambers believe
that LEPs must have a strong economic focus—on productivity,
private-sector job creation, and economic diversity. They must
then set a clear vision, identify barriers to growth, and propose
how to remove those barriers and foster investment confidence.
While the Chamber Network supports the principle
of a Regional Growth Fund, resources must be tightly prioritised
on packages of investment that improve the local business environment—particularly
infrastructure—and deliver clear economic benefits.
In order to achieve effective co-ordination between
LEPs, it is critical that central government provides greater
clarity over the division of labour between Whitehall, LEPs, and
any other economic development bodies. Questions over functions
set to be "nationalised"—especially around inward
investment and international trade—must be resolved as a
matter of urgency.
LEP Boards must be private-sector led, with at
least 50% business members—plus a dynamic and respected
business Chair. BCC believes that LEPs could develop a nomination
and selection process for business members that captures the interest
of local businesspeople. Council leaders—not back-benchers
or Cabinet members—must be the public-sector representatives,
to deliver legitimacy and confidence.
The Government must ensure that the appropriate
time is taken to get the transition towards the new system right,
putting in place a clear timetable with arrangements for the transition
of RDA assets and European funding, both of which are a critical
part of the funding mix in many areas.
13 August 2010
Annex 1
REGIONAL GROWTH FUND CONSULTATION: RESPONSE
FROM THE BRITISH CHAMBERS OF COMMERCE
INTRODUCTION
1. The British Chambers of Commerce welcomes
the concept of a Regional Growth Fund, which will enable innovative
private-sector led growth bids to challenge and compete with more
established approaches to economic development. However, we would
like to record some concerns about the haste with which the Fund
is being established—as well as the need to use its incredibly
limited resources to support a relatively small number of projects
with the potential to spark substantial private-sector growth.
2. Business leaders across the UK are clear
that any future efforts to grow local and sub-regional economies
must be based around a clear and innovative shared vision—and
a desire to fundamentally re-shape the way that local economies
operate. There is a danger that the Fund could become little more
than a new way to finance "business as usual" in economic
development—with resources being spread thinly across the
country to satisfy political and geographical considerations,
and investments focused on relative, rather than transformative,
economic improvements.
3. Our summary view is that the Fund must
make a real and demonstrable difference to existing activity
on the ground—and not simply used to pick up executive
staff from Regional Development Agencies and other bodies that
are undergoing transition and closure. The Fund's criteria must
require clear, transparent plans that show how the funds are going
to hit the ground—and deliver improvements to local productivity,
private-sector job creation, and economic diversity. This is especially
important as the Fund will have significantly less resource at
its disposal than the RDAs. Our responses to the individual consultation
questions can be found below.
Q1) Allocation of Funding
4. BCC strongly supports the bid principle
articulated in initial Government statements on the Regional Growth
Fund, and subsequently referenced in the consultation document.
We believe that the only way for the Government to spur innovation
in economic development—and to break out of the grant mentality
that has predominated in many areas in recent years—is to
allow a wide range of bidders (private, public, voluntary, and
hybrid) an equal opportunity to demonstrate how their proposals
can deliver the biggest economic boost for an area.
5. We believe that at least 80-85% of the
resource available under the Growth Fund (£400-420 million
pa) should be allocated on a bid basis to support capital investment.
The bidding process should be flexible—eg the Government
should encourage bids for loans, equity investment, and grant
funding on an equal basis, rather than split the fund into separate
tranches.
6. The remaining 15-20% of the Fund (£80-100
million pa) could be used to support LEPs on a grant basis—to
ensure that each LEP can fund the revenue costs associated with
bringing local infrastructure projects forward. Business leaders
across the country repeatedly emphasise the importance of small
amounts of revenue funding in order to lever in significant capital
investment, whether from the public or the private sector. This
funding must not, however, simply be used to fund recruitment
of senior executive staff—as noted above.
Q2) Type of activities
7. The BCC has set out three fundamental
principles that we believe represent the core mission for all
Local Enterprise Partnerships. Allocations from the Regional Growth
Fund should mirror these. Accordingly, the Fund should only be
used to support projects that deliver:
— Increases in productivity/private sector
economic activity in a LEP area; OR
— Increases in the number of private sector
jobs in a LEP area; OR
— Improvements in economic diversity (where
the LEP area suffers from sectoral imbalance) or economic sustainability
(where the LEP area needs to invest to maintain existing strong
sectoral mix).
8. We agree that a level of flexibility
will be required in determining whether the activity proposed
in a given local area fits with the above objectives. However,
given the business community's consistent calls for greater investment
in local transport infrastructure and premises for private-sector
growth businesses, and the limited amount of resource available
under the Fund, the BCC believes that "package" bids
that improve an area's physical business environment must be prioritised
over other interventions (eg back-to-work initiatives that offer
fewer short-term prospects for visible local economic growth,
despite their clear social benefits).
Q3) Criteria for assessment
9. The BCC is concerned that the two high-level
objectives for the Fund—leveraging private-sector growth
and reducing public-sector dependence—may not always both
be covered by a single bid.
10. Accordingly, the Government should think
further about how it will differentiate between bids that deliver
high levels of absolute growth (eg a project in a successful
area levering in significant new private sector investment and
large number of private-sector jobs) and those that deliver greater
diversification and transformative potential (eg a project
in a less-successful area that "creates a marketplace"
for substantial private-sector investment).
11. In addition to the criteria set out
in the consultation document, BCC believes that no bid should
go forward to the Independent Approval Panel for consideration
without the express endorsement of the local Chamber of Commerce—to
ensure that there is a real unity of purpose between local private—and
public-sector actors. We believe that this would also cut down
on the number of poor-quality or hastily-considered bids received
by the Panel.
12. The BCC also believes that bids to the
Fund must demonstrate how the capital received would integrate
with other public-sector investment within a locality—so
that private-sector led growth is best aligned with limited Government
investment.
Q4) Two-stage bidding process
13. We understand the Government's desire
to hold two rounds of bidding, one for 2011-12 and one for 2012-13.
However, we would question whether robust bids can be brought
together by December 2010 for the first round. Many bids made
at that time will simply be existing "off-the-shelf",
public sector-led projects that have been delayed or cancelled
due to RDA and local funding constraints. Additionally, this tight
timescale might "crowd out" potential private-sector
bidders, who will need to invest significant time and resources
to develop innovative new bids and partnership arrangements with
councils and other local actors. We would suggest a date for the
first round that coincides with the start of the 2011-12 financial
year—eg 6 April 2011.
14. The BCC strongly supports the principle
of a two-stage bidding process—with outline bids followed
by the development of a full business case. This will prevent
the wasting of time and resource, both by local authority economic
development departments (which are likely to be smaller and even
more under-resourced in future as councils' budgets become even
more constrained), and by any putative private—or third-sector
bidders.
Q5) Longer-term role for the Regional Growth
Fund
15. Economic transformation—whether
local or national—is a long-term undertaking. The British
Chambers of Commerce believe that in order to be successful, the
Regional Growth Fund must be a sustained initiative. Otherwise,
it will be viewed as an unstable, short-term source of grant funding—rather
than a long-term enabler of critical local infrastructure projects.
16. A long-term Fund will help to build
up business and investor confidence—thereby delivering the
private-sector leverage that the Government wants to see as a
result of the Fund's pump-priming investment.
17. Chambers of Commerce would also support
mechanisms to recycle money into the Fund over time—eg from
loans and equity investments, in a manner similar to the European
Investment Bank's JEREMIE initiative, which already operates in
a number of areas of England.
18. We would also encourage the Government
to explore the possibility of direct private-sector and local
authority investment in the Fund over the longer term. Please
see the attached paper, written in 2008 by the BCC's Director
of Policy, Adam Marshall (while at the Centre for Cities think-tank)
for some further ideas on how this could be encouraged.
CONCLUSION
19. We would be happy to discuss any of
the points made in this response with Ministers or officials in
further detail, if that would be helpful. Please contact Adam
Marshall, Director of Policy and External Affairs, on 020 7654
5815 or a.marshall@britishchambers.org.uk.
| 
