Written evidence from the Local Government
Association
EXECUTIVE SUMMARY
The LGA has long argued for the devolution of
economic development functions to councils and businesses working
in partnership at the level of real economic geography. By aligning
the geography of decision-making with the actual economic geography
and linking decisions across different policies, this would improve
outcomes and value for money, as well as improving accountability.
The Government's policy of replacing Regional Development Agencies
(RDAs) with Local Enterprise Partnerships (LEPs) has the potential
to lead to exactly that desirable result. But for it to succeed:
— the LEPs need to have ownership of real
decisions about priorities and budgets, and a wide remit; RDA
functions should only be repatriated to Whitehall departments
where it is not possible to devolve them, and they should certainly
not be centralised and then recommissioned through local delivery
bodies parallel to LEPs;
— the Regional Growth Fund establishes
an attractive model insofar as it pools different departmental
funding streams; but the proposed bidding mechanism risks being
inefficient and overcentralised;
— there is demand from councils, business,
and potential LEPs for coordination between LEPs; this coordination
can be achieved without central intervention and should be allowed
to generate a range of different arrangements to suit different
circumstances;
— the transition from RDAs to LEPs should
be as swift as possible. RDAs' mixed pool of assets create special
problems and the taxpayer's interest will not be secured simply
by seeking immediate cash realisations; and
— in the short term there is a need for
administrative stability about European programmes, but the objective
should be to drive future EU allocations through priorities set
by LEPs.
THE NEW
LOCAL ENTERPRISE
PARTNERSHIPS
1. The LGA is a voluntary membership body
and our 422 member authorities cover every part of England and
Wales. Together they represent over 50 Million people and spend
around £113 Billion a year on local services. They include
county councils, metropolitan district councils, English unitary
authorities, London boroughs and shire district councils, along
with fire authorities, police authorities, national park authorities
and integrated transport authorities.
2. The LGA has long argued for the devolution
of economic development functions to councils and businesses working
in partnership at the level of real economic geography.[8]
Aligning the geography of decision-making with the actual economic
geography and linking decisions across different policies improves
outcomes and value for money, as well as improving accountability.
This model operates successfully and is the norm in a number of
jurisdictions in Europe, and in North America. The Government's
policy of replacing Regional Development Agencies with Local Enterprise
Partnerships has the potential to lead to exactly that desirable
result.
3. Councils are currently working with local
business leaders and others to develop their LEP proposals in
response to the Government's invitation letter of 29 June. It
would not be right to pre-empt the outcomes of local discussions
at this point. In most places, we believe councils and businesses
are working well together and we hope that this will lay the foundations
for lasting improvements in the relationship between business
and the public sector.
4. It may be worth highlighting, however,
that both councils and business organisations have perceived a
tension between the Government's insistence that each LEP proposal
should be a genuine statement of ambition driven by local agreement,
and the many points in the Ministerial letter which suggest that
some proposals have been ruled out before they are made. For example,
it is not clear what Ministers mean by "led nationally"
[does this mean "delivered through a national delivery body"?]
for functions such as business support or inward investment; these
are services many would-be LEPs would wish to deliver: does a
national "lead" allow that? And if a national "lead"
were to commission services through a structure parallel to LEPs
and not through LEPs, this would create a significant tension
with the Government's wish to reduce the number of public bodies
and structures.
5. Similarly, the Ministerial letter says
that natural economic geography requires partnerships between
"a number of upper-tier authorities". This has caused
puzzlement in some large counties, without neighbouring unitaries,
where a county-level arrangement could make economic sense. While
the LGA is very pleased that Ministers are determined not to overlay
their original letter with further detailed guidance, it must
be recognised that local government and business are unused to
the idea of Ministers taking a genuinely laissez-faire approach
to local proposals and remain suspicious that these ambiguities
in the invitation letter require them to second-guess Ministerial
preferences which have been set out only partially and obscurely.
It will be important for Ministers to reconfirm after 6 September
that they want to pursue conversations with all the LEP proposals
they receive and are not intending to "pass" or "fail"
them against so far undisclosed criteria.
6. The Committee is interested in the value
for money gains which this change may bring. Although there
is an obvious immediate gain in removing the RDAs' significant
overhead costs, the real gain from reform is through better targeting,
coordination and accountability of decision-making, which should
increase the economic return on public expenditure. Although the
RDAs have shown a positive return on their spending, what matters,
as the NAO has pointed out, is whether that return is as large
as it could be. The RDAs have not, for example, achieved private
sector leverage to the same degree as the Single Regeneration
Budget, which preceded them. There is also evidence that public
sector investment is more supportive of growth where decisions
about regeneration, spatial planning, transport and employment
are taken in a connected way and LEPs should enable that to happen
more easily. Specific examples of ways this may work include:
(a) local enterprise partnerships can bring together
the range of activities needed to reduce unemployment. Some will
focus on job creation, reducing the demand for welfare payments;
(b) interventions can be targeted to local economic
priorities based on the local knowledge of councils and businesses
and real economic geography;
(c) the budget of local enterprise partnerships
can be applied flexibly across different departmental remits,
where the local evidence suggests it will generate the highest
levels of local economic growth.
7. On functions, LEPs should be as broad
as councils and local businesses want them to be. Many areas want
their LEP to cover the full range of inter-linked issues that
underpin local economic performance such as local transport provision
and infrastructure investment, housing, regeneration, business
support and advice (including better regulation), skills and employment,
training provision, or support for individual sectors such as
tourism. This may be through direct budget-holding and decision-making,
or through taking a strategic role and influencing decisions by
councils, businesses and other agencies.
8. There is a risk, however, that the functions
Ministers are willing to devolve to LEPs will be limited to those
activities that fall within the scope of BIS and CLG, and that
other Government departments do not fully understand—or
are deterred by departmentalism from acknowledging—the opportunities
that local enterprise partnerships provide to overcome the inefficiencies
of departmental boundaries though localising budgets and decisions
in LEPs.
9. This is best illustrated with an example.
Labour markets are very different from place to place—in
some places there are nearly 30 registered Job Seekers Allowance
claimants for every vacancy registered at the local Job Centre
Plus, in other areas there are more vacancies than claimants.
Getting people back into work requires an integrated approach
drawing on a range of public services—for example, mental
health, child care and housing. However, the Department of Work
and Pensions is proposing to commission the Work Programme nationally
without making horizontal linkages to other activities relevant
to helping people back to work, and shows no signs of engagement
with policy on Local Enterprise Partnerships, despite the centrality
of employment to local economic performance.
10. There is also a risk that some current
RDA functions may be recentralised even through they could be
discharged more effectively by the local enterprise partnership—business
support, inward investment, and sector support are examples where
the Government has indicated that it wants to lead the function
nationally. This seems to us to contradict the Government's overall
intention to localise services. We expect a number of proposals
to challenge Departments' views on the functions that might be
undertaken nationally. A particular version of this risk is that
lobby groups which have shared an interest in local economic development
with RDAs may now prefer to argue that the interests of national
strategy are better served by centralising responsibility rather
than supporting the logic of the LEP policy. Tourism—although
quintessentially driven by the economics of the differences between
places—is one area of the economy where this is a particular
issue.
11. The Government has published a consultation
paper on the Regional Growth Fund which we are considering. We
expect the funding arrangements for local enterprise partnerships
to be clarified in the Spending Review. We welcome the proposal
that the Regional Growth Fund should pool funding and be flexible
about the allocation of money to different priorities such as
transport or physical regeneration. We are cautious, however,
about the proposed bidding mechanism and hope that this will not
cast LEPs as clients of central government departments.
12. On co-ordination, we agree that it will
be important for local enterprise partnerships to co-ordinate
their activities where individual issues—major transport
projects for example—address economic geography at a higher
scale than that of individual LEPs. The need for this will vary
from place to place depending on infrastructure needs and development,
clusters of economic activity, travel-to-work patterns and the
shape of local retail and consumer markets. These linkages will
often straddle the former regional boundaries, depending on the
economic connections. LEPs, and the support networks they develop
can be left to determine their own arrangements for co-ordinating
their activity.
13. On structure and accountability, we
would make a number of points:
(a) The precise form and geographical coverage
of LEPs will vary from place to place—determining the boundaries
will not be an exact science given the complexity of the economy.
The LGA's central message to Government has been the need for
flexibility. What is clear is that the former regional boundaries
were not driven by economics; the boundaries of LEPs should represent
a much better fit between economic geography and what is administratively
practicable.
(b) In many places the models for LEPs, and the
partnerships with business, already exist, and councils and business
will wish to develop them further as a result of the new opportunity.
14. The Government has announced that Regional
Development Agencies will cease to exist in 2012. This timetable
allows councils and businesses to put in place the arrangements
for local enterprise partnerships. The precise nature of the transitional
arrangements will vary depending on how the issues of function
and finance, geography and governance are resolved from place
to place.
15. There is a particular concern in many
places about how the assets of Regional Development Agencies will
be transferred. We understand BIS are preparing an inventory of
assets and liabilities, and an options appraisal. This exercise
will need to inform decisions about the future of the RDAs' assets
and liabilities. Councils are keen for the Government to decide
its general approach the RDAs' portfolio swiftly.
16. Such an approach will need to understand
how seemingly small, constituent elements significantly impact
on the overarching plans for an area. In some places, for example,
individual sites make up crucial elements of the land assembly
needed to achieve master plans for regeneration. Where this is
the case, the taxpayer's interests will be best served by understanding
the value of the overall scheme rather than the individual asset
(in this instance, the risk is that, if sold on the open market,
any receipt from the asset could be illusory as it would be directly
related to the willingness of the public sector to buy it back
at a premium). In others, assets may be loss-making but tenanted
by voluntary sector organisations, and the consequences of different
options for transfer would need to factor in the total taxpayer
value of destabilising those organisations. At the same time,
a blanket policy of transferring the RDAs' portfolio to LEPs (or
to councils on LEPs' behalf—not all LEPs will necessarily
want to be direct holders of assets, we believe) risks saddling
LEPs with the RDAs' worse investments, as well as those with a
positive value.
17. It is important that these decisions
are made with the full agreement of local councils and businesses
that will make up the local enterprise partnerships. We believe
that the Government's thinking on this issue is developing less
rapidly than that of councils and we recommend that the Government
open a full dialogue with LEPs and councils about it quickly.
18. With regards to funding from outside
bodies, the RDAs currently manage the European Regional Development
Fund (ERDF) and some of the Rural Development Programme for England
(RDPE). Looking forward, LEP priorities should drive all future
EU spending on regeneration and skills—including ERDF, RDPE
and the European Social Fund 2014-2020 programmes. In the meantime,
it will be important to maintain some administrative stability
for the remainder of the current ERDF and RDPE programmes while
taking opportunities for funds to better meet local business and
community needs, such as ensuring strong LEP representation on
the decision-making boards allocating funds to projects.
16 August 2010
8 See, for instance, the LGA's publication "Vive
la Devolution" of February 2007: http://www.lga.gov.uk/lga/aio/21918 Back
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