Government Response
The Government welcomes the Committee's report on
its inquiry into local enterprise partnerships. It is helpful
to have the analysis, conclusions and recommendations that the
Committee has drawn from its inquiry and the evidence submitted.
The Government also welcomes the Committee's proposal to return
to this subject in the future.
The Government welcomes the Committee's broad support
for the creation of local enterprise partnerships. The Government
believes that local communities and businesses are in the best
position to understand and respond to the opportunities and needs
of their own economies, and that creating local enterprise partnerships
will allow them to do this. The Government has acted quickly to
implement its commitment in the Coalition Agreement to establish
local enterprise partnerships, and these partnerships will provide
the clear vision and strategic leadership needed to drive sustainable
private sector-led growth and job creation in the areas they cover.
Conclusions and Recommendations of the Committee
Set out below are the Government's responses to the
Committee's conclusions and recommendations, under the headings
adopted by the Report. These are listed in the order in which
they appear in the Report, with the Government's response set
out below each of them. Where it makes sense to do so some answers
have been grouped together.
THE CREATION OF NEW LOCAL ENTERPRISE PARTNERSHIPS
It is clear that while RDAs provided many benefits
to their regions, mission creep and the lack of a clearly defined
strategy undermined their success. Furthermore, they suffered
from a democratic deficit. A key test of the new Local Enterprise
Partnerships will be the extent to which they learn from both
the successes and failures of the RDAs.
(Paragraph 22).
1. The RDAs, over time, moved away from their
core role and took on too many diffuse responsibilities. As well
as this mission creep, the RDAs suffered from a lack of local
accountability and were based on arbitrary regional boundaries.
These problems all undermined the RDAs' effectiveness and the
Government has therefore decided to abolish them and establish
new arrangements, including local enterprise partnerships. However,
the Government agrees that it will be valuable for local enterprise
partnerships to learn from the experiences of RDAs. In particular,
RDA knowledge management plans will set out how they plan to capture
and transfer their knowledge so that it remains available to the
bodies that will need it in the future—including local enterprise
partnerships.
LEP policy is already being implemented, but it
could be proceeded with alongside an examination of the record
of some forerunners to LEPs, so that lessons could be learned
from their performance and from any failings. The learning curve
of the initially successful 24 bidding organisations is one that
could also contribute to the success of other, following, LEPs
and help to even out performance. Given the important part that
LEPs will play in recovery, we recommend that the Government undertake
a rolling review of the first tranche of LEPs. (Paragraph 25)
2. The Government agrees that it will be desirable
for local enterprise partnerships to learn from each other. The
Government will be working with partnerships to understand how
their approach to local economic growth supports its overarching
economic policy as set out in the Local Growth White Paper.
However, the Government will not be imposing any performance
management frameworks for local enterprise partnerships or requiring
them to follow particular models of operation.
3. It is also worth noting that not all partnerships
will move at the same pace and some local enterprise partnerships
that were not in the initial group of 24 may move more quickly
than some of those in the earlier group. The Government will not
be differentiating its approach to partnerships depending on which
tranche they fall within.
It is clear that there is a significant level
of enthusiasm for a fresh approach to partnerships between business
and local government; and one which is based on a greater affinity
for local economies among those participating. We conclude that
LEPs have the potential to offer a more dynamic approach to enterprise
through local businesses and local government. LEPs may also provide
an enhanced opportunity for small and medium sized businesses
to have a greater say in local development priorities. The opportunity
for greater business command represents, however, a challenge
both to business communities and to local government to be yet
more proactive and creative. (Paragraph 34)
4. Local enterprise partnerships provide a real
opportunity for business and local government to improve the environment
for business in their areas and develop the local vision for growth.
5. Through their planning and regulatory roles,
local authorities have considerable impact on the ease of doing
business in their areas. A strong business voice in partnership
with the local civic leaders creates an opportunity to ensure
neighbouring authorities take a consistent approach across a real
economic geography to the benefit of business and growth. The
Local Growth White Paper (Cm 7961) notes that a more streamlined
and coherent approach to local planning application processes,
strategic planning for economic development and infrastructure,
freeing up of transport bottlenecks, better local regulation,
and facilitating investment to support key local sectors and priorities
across natural economic geographies will be a major step forward
in fostering a strong environment for business growth. Local enterprise
partnerships can play a key role as interlocutors between business
and local authorities to ensure coherent and detailed policies
are delivered.
6. The Government agrees that this new way of
working will demand more innovation and creativity in local areas.
The framework the Government has established for this policy,
set out in the Local Growth White Paper, is designed to ensure
that business is at the heart of decision making within these
partnerships, and to give local authorities and business - along
with other key economic stakeholders such as universities and
further education colleges, and social and community enterprises
- the tools and incentives to rise to this challenge.
We believe that regional groupings should be recognised
where there is a wish for them and the Government should be prepared
to fully engage with such bodies where they have clear local business
support. Where a minority of business community members in an
area disagrees with the need for a regional grouping, that minority
should be willing to show flexibility in accommodating the majority
wishes of members who want to maintain an element of regional
co-ordination. Regional groupings should also be recognised where
LEPs believe it is appropriate to have an overarching body dealing
with matters such as transport, infrastructure or EU funding.
(Paragraph 45)
7. The Local Growth White Paper sets out the
Government's commitment to encourage cooperation between partnerships
where this would result in a more efficient use of resources and
secure a better outcome than operating in isolation. This cooperation
need not be restricted to neighbouring partnerships and will be
particularly important where partnerships share a common interest.
The Government will not be prescriptive about how this cooperation
is achieved; local enterprise partnerships are not NDPBs and are
being developed from the bottom up. However, one way local enterprise
partnerships could do this is through a regional grouping, as
is the case in the North East where the two local enterprise partnerships
propose to work together on issues of common interest.
We note the Minister's confidence that LEPs will
not be overwhelmed by the Welsh and Scottish development agencies,
but we remain concerned that without a separate funding stream
LEPs could suffer. We recommend that the Government, in its response
to our Report, set out how those functions which are being best
performed in Scotland and Wales will be matched by LEPs in England,
in particular in light of the fact that the Regional Growth Fund
will not be available to support the ordinary functions of an
individual LEP or LEPs. (Paragraph 49)
8. The Government does not believe that local
enterprise partnerships need a separate funding stream in order
to match economic development delivery in Scotland and Wales.
Local enterprise partnerships will enable places to focus on the
issues that are really affecting their local economy, rather than
on issues identified by the remote regional tier or Whitehall.
Also, the Government will be retaining national leadership of
some functions which will ensure their consistent delivery. The
new approach of locally-led partnerships to focus on local priorities,
together with national leadership of key functions which have
national-level impacts, will enable strong and effective support
for growth.
9. Furthermore, it is accepted by all the administrations
in the UK that it is in no one's long-term interest to engage
in competitive support schemes for business, and this is reflected
in the approach to business support in each of the devolved administrations.
We conclude that, while there are clear merits
in founding local economic partnerships on strong local loyalties,
a structure consisting of significantly more than 40 bodies has
the potential to result in business confusion, lack of critical
mass and insufficient economies of scale. However, a structure
which produced 12 to 15 while delivering a simplified structure
might risk reimposing those arbitrary associations between areas
for which the RDAs were criticised. (Paragraph 55)
It seems likely that, with 24 LEPs already approved,
the final number will rise to around 40. LEPs should be approved
on their business case rather than an artificial maximum number,
but the Department must be aware that too high a number of LEPs
runs the risk that they will not be effective. (Paragraph 56)
10. The development of local enterprise partnerships
is a bottom up process. The Government wishes to enable partnerships
to better reflect the natural economic geography of the areas
they serve and hence to cover real functional economic and travel
to work areas. In addition, the Government expects that partnerships
will be of sufficient size to be able to have a strategic oversight
of the area covered. In line with this approach, the Government
agrees it is appropriate to recognise local enterprise partnerships
on their business case rather than an artificial maximum number.
THE FUNCTIONS OF LOCAL ENTERPRISE PARTNERSHIPS
We welcome the fact that the Government appears
to be taking a flexible approach to the national and local functions.
However, for this to become a reality, the Government will need
to demonstrate that it is committed to devolving functions where
there is clear evidence to show that they have already been managed
well at regional level. (Paragraph 61)
11. As set out in the Local Growth White Paper,
the Government's economic development framework is based on supporting
interventions at the most appropriate spatial level. In some cases
this may mean interventions led by local enterprise partnerships,
while in other cases those interventions may need to be co-ordinated
or delivered at the national level where there are significant
economies of scale, where consistent national delivery is important,
and where benefits will be obtained from a more expert, efficient
and strategic approach.
12. For interventions which are best managed
at a sub-national level, local enterprise partnerships will lead
on determining local strategies for delivery. They will be able
to base these on local business needs and existing networks, in
order to provide support for rebalancing the economy towards the
private sector.
13. In the particular case of foreign direct
investment, the Government believes that the benefits of the
UK's competitive advantage and differentiation from key competing
nations is most effectively deployed at the national level. While
the RDAs made a positive contribution to the UK's inward investment
effort, the Government feels inward investment can better be delivered
in England through a single national organisation. However, this
national effort can usefully be supplemented by local support
and UKTI will need to connect into local enterprise partnerships
and other local organisations to capitalise on an area's offer
and to ensure a seamless approach for potential investors.
We conclude that the Government's list of potential
roles for LEPs appears broadly consistent with the evidence presented
to us on suitable priorities for the new bodies. However, while
we welcome the further details on LEP activity contained in the
White Paper, the Government must guard against a re-run of the
history of RDA mission creep. (Paragraph 65)
14. As the Committee notes, the responsibilities
falling to RDAs gradually increased over time, leading to significant
complexity and duplication of responsibilities, increased costs
to the public purse and investments that did not always achieve
good value for money.
15. The Government's objective for reform is
to encourage strong local leadership to promote private sector-led
growth and job creation, based on institutions which match economic
reality on the ground and can make a real difference. As locally
led bodies, local enterprise partnerships will focus on delivering
their vision without having responsibilities imposed on them by
Government—avoiding the mission creep RDAs suffered from.
We welcome the Government's intention that LEPs
should be encouraged to work effectively to meet local skills
demands. Without distracting from their aim of fostering enterprise
and removing barriers to growth, LEPs can clearly have it on their
radar to identify both opportunities and gaps and should work
with local training providers to address those objectives. (Paragraph
72)
16. The Government agrees with this and is already
encouraging local enterprise partnerships to work closely with
further education and higher education providers, and vice versa,
as well as with employers, Jobcentre Plus and learning providers.
Further education involvement in LEPs seems to
us to be particularly important to addressing skills gaps, while
higher education involvement makes sense from the point of view
of encouraging ideas for LEPs to use in innovation. We believe
that LEPs should consider co-opting representatives of further
education and higher education onto their governing bodies, either
permanently or on an ad hoc basis. (Paragraph 73)
17. The Government is encouraging local enterprise
partnerships to work closely with universities, further education
colleges and training providers, who play such a key role in local
economies. As partnerships set up their boards, we anticipate
that many will want to include a university or further education
representative. However, the Government has not set a specific
requirement for further education and higher education involvement
in local enterprise partnership boards, and it will be up to each
partnership to determine the most appropriate model for their
interaction with other key local economic players such as higher
education and further education institutions. Similarly, the Government
will also continue to encourage partnerships to consider the diversity
of representation on their boards and ways of attracting suitably
qualified women.
COLLABORATION AND COMPETITION BETWEEN LOCAL ENTERPRISE
PARTNERSHIPS
The challenge facing both the business and political
community will be to ensure that, where appropriate, LEPs collaborate
to the benefit of all parties. Therefore, we recommend that the
Government consider making LEP recognition conditional on membership
of a knowledge sharing network so that weaker LEPs have access
to the experience and know-how of others, or even a duty to cooperate
similar to that envisaged for planning bodies. (Paragraph 80)
18. Local enterprise partnerships will be recognised
when they meet the Government's expectations regarding support
from business; economic geography; local authority support; ambition
and added value; and board membership. However, the Committee
is right to note that some partnerships will be on a steeper learning
curve than others. The Government is committed to working with
each new local enterprise partnership to enable them to establish
their roles and functions. Partnerships will differ across the
country in both form and functions in order to best meet local
circumstances and opportunities. As such there will be no one
process for this engagement.
19. As set out in paragraph 7, it is the Government's
expectation that local enterprise partnerships will want to cooperate
where this would result in a more efficient use of resources and
secure a better outcome than operating in isolation. This could
include the sharing of best practice but the Government does not
intend to prescribe how they do this.
20. The duty to co-operate, which the Government
is introducing through the Localism Bill, will ensure that local
planning authorities and public bodies are involved in constructive
and active dialogue as part of a continual process of engagement
in the planning process. The duty will be a key element of the
Government's proposals for cross-boundary strategic planning once
regional strategies are abolished. Reflecting this new culture
of co-operation, where local enterprise partnerships are interested
in strategic planning the Government will encourage the constituent
local planning authorities to work with them to ensure that economic
development and infrastructure delivery is co-ordinated across
local authority boundaries.
We welcome the Government's agreement that strategic
coordination of certain projects or sectors may require groups
of LEPs to work together, including on a regional or sectoral
basis where appropriate. Where there is agreement among LEPs
that there should be a body to perform such coordination, we recommend
that the Government support it. (Paragraph 87)
21. If groups of local enterprise partnerships
decide that a body is required to co-ordinate particular projects
or sectors that are not nationally led the Government welcomes
their creation. For example, on transport prioritisation and funding,
local enterprise partnerships co-ordinating with each other at
the strategic level may be better placed to take decisions across
wider areas than a single partnership working on its own. This
could also be the case for other cross-boundary strategic issues
such as broader infrastructure and energy provision. However,
it will be up to the members of these partnerships to support
this work in the way that best meets their local priorities. And,
though the Government welcomes such an approach where partnerships
want it, it will not mandate it.
22. In addition, the Local Growth White Paper
did make it clear that the Government will continue to provide
leadership on framing policies towards sectors of national importance,
working with local enterprise partnerships to ensure that local
issues and insight inform national policy but without fragmenting
the UK's ability to attract new investment from global companies.
TIMING AND TRANSITION OF THE CHANGE TO LOCAL ENTERPRISE
PARTNERSHIPS
While the truncated timetable for LEP bids has
been less than perfect, it has delivered 24 approved bids, which
will now go forward. However, their coverage of England is patchy.
We agree with the Minister that they could act as pathfinders
of the next tranche of LEPs but we recommend that the Government
intensify its support for those bids that need more work. The
second tranche of approvals should happen as soon as possible,
not least because of the imminent deadline for the first round
of Regional Growth Fund bids. (Paragraph 97)
Universal coverage by LEPs may not be necessary,
but gaps should not result from Government non-approval of bids
for areas that have expressed a wish to have a LEP. Instead,
additional support should be targeted to such areas to enable
them to meet the requisite approval standards. (Paragraph 98)
23. To date a total of 28 local enterprise partnerships
have been asked to put their governance arrangements in place,
covering 65% of all businesses in England and 70% of the population[1].
24. The Government is continuing to engage with
prospective partnerships to support them as they develop their
proposals and anticipates announcing further partnerships in coming
weeks. However, partnerships are progressing at the speed that
is right for them, and the final decision on whether to form or
retain a local enterprise partnership is a matter for local business
and civic partners to decide.
25. It should be noted that announcement as a
local enterprise partnership is not a prerequisite for a successful
Regional Growth Fund bid. Other public-private partnerships and
private sector companies can also put forward applications for
the Regional Growth Fund. Bids will be assessed against the Fund's
criteria; local enterprise partnerships will compete equally with
other bidders.
The need to support recovery and growth with the
necessary intelligence should be of pre-eminent importance in
spending priorities, even at a time of highly constrained public
finances. We recommend that the Government set aside funds for
managing retention of RDA expertise, if necessary by providing
proportionate incentives for an adequate number of RDA staff to
remain in post or by providing interim funding for recruitment
to LEPs pending establishment of more permanent LEP funding models.
Furthermore, the Government should bear in mind the fact that
retention of RDA expertise may also assist in developing those
LEP bids which fell short of approval in the first round. Evidence
to us suggests the need for a proactive approach to these issues
by the Department's transition team. (Paragraph 106)
26. The Government agrees that access to regional
intelligence is important to support recovery and growth. The
Local Growth White Paper set out the Government's commitment to
undertake a programme of economic intelligence and analysis—
bringing together business facing intelligence with consistent
national analysis. The Government will share information with
local enterprise partnerships who will, equally, also be an important
source of intelligence. The expertise of the RDAs in this area,
including the Regional Observatories, is valuable. Some RDAs are
making efforts to secure the future of their Regional Observatories,
for example through inviting expressions of interest in acquiring
the Observatories.
27. In addition, the Government is working with
the RDAs to ensure that their closure and transition plans result
in a well-managed and orderly closure. The plans include, as a
significant component, a work strand to ensure that RDAs' knowledge
assets are managed effectively and transferred to relevant bodies,
so that, as far as possible, the knowledge remains available to
those, including local enterprise partnerships, which need it
in the future.
28. Most RDAs have provided assistance as appropriate
to emerging local enterprise partnerships in their area.
The Government urgently needs to finalise the
process of setting clear spending mandates for RDAs (including
for their day-to-day administration budgets between now and wind-down)
so that there is certainty for businesses on the extent of future
funding of projects and broader business support. (Paragraph
109)
29. The Government recognises that there was
some uncertainty during the last year with regard to RDA spending—particularly
at the time of the General Election and in the period leading
up to the Spending Review. It is normal to avoid entering all
but the most urgent commitments at these times. BIS issued indicative
budgets for 2011-12 to the eight RDAs outside London on 14 December
2010; with those for the London Development Agency to follow shortly.
RDAs therefore now have clear spending mandates for the period
up to their planned closure on 31 March 2012.
We note that the Government will announce the
new delivery structure for European regional funding at Budget
2011. We will carefully monitor whether that structure addresses
the ability of LEPs to win EU funding. In the meantime, the Government
has to ensure that there is no hiatus in funding in the period
between the winding down of RDA activity and the start-up of other
projects, including Regional Growth Fund projects. It is crucial
that the construction of the new LEP system does not jeopardise
the allocation of funds either in the current or in the future
spending rounds. The extent of RDA expertise in preparing bids
for EU funding is also another reason to put in place a proper
transition plan for the retention of a level of RDA expertise.
(Paragraph 111)
30. The Government is working closely with the
RDAs and other partners to put in place new delivery structures
for European Regional Development Fund (ERDF) programmes by 1
July 2011. This new structure will retain the key expertise of
the RDA staff by transferring ERDF staff to DCLG. Meanwhile the
ERDF programmes remain open for business with projects continuing
to be appraised and approved. The Government aims to increase
local influence and oversight of the programmes and to ensure
that ERDF is readily accessible to local authorities and local
enterprise partnerships. The Government is also making arrangements
to align the application processes for the ERDF and Regional Growth
Fund. Delivery of the Rural Development Programme for England
2007-13 will be transferring from the RDAs to DEFRA and will be
based on a stronger national lead by DEFRA with a sub-national
network of delivery support, which delivers efficiencies but provides
locally accessible support.
FUNDING AND RESOURCES FOR THE NEW BODIES
We welcome the Local Government Resources Review
and its recognition that alternative funding models based on potentially
greater contributions from business would require support and
endorsement from the local business community. However, variations
between local economies must be addressed when considering such
models. Given the importance to local authorities and LEPs of
developing new funding streams, there is a risk of a gap in funding
unless the Review is conducted expeditiously and subsequent legislation
introduced as soon as possible. (Paragraph 116)
31. The Government is committed to providing
incentives for local authorities to promote economic growth through
the business rates system and has outlined, in the Local Growth
White Paper, proposals to enable councils to retain locally-raised
business rates. Further work on this will be taken forward through
the Local Government Resource Review which will deliver proposals
by July 2011, with primary legislation being needed to give effect
to any changes.
32. The Review will consider appropriate protections
for business to accompany any changes as businesses should not
be subject to locally imposed increases in the burden of taxation
that they do not support. It will also look at how to manage the
distributional impacts of any new arrangements.
LEPs will not necessarily require large budgets
to run their operations, but they will need a degree of independent
financing which will take time to develop on a sustainable basis.
Innovative funding methods such as tax increment financing will
need to be trialled before being applied generally, and in any
case will probably not be suitable for all local economies. Furthermore,
the private sector might not be willing to stump up cash until
LEPs have a track record of success, so there is a risk of a short-term
funding gap. We strongly recommend that, where there is a demonstrable
need, the Government consider setting aside funds to support those
LEP start-ups which lack the initial capacity to establish themselves.
(Paragraph 122)
33. The Government does not wish to replicate
previous methods of allocating funding for economic development,
where large sums of public money were spent with limited results.
As the Local Growth White Paper made clear, local enterprise partnerships
will be expected to fund their own day-to-day running costs and
will also want to consider how they can obtain the best value
for public money by levering in private sector investment.
34. The Government would encourage partnerships
to apply for funding from both the Regional Growth Fund and also,
where eligible, European sources to help support specific projects.
Further to this, the Government will also consider—through
the Local Government Resource Review—incentives for local
authorities to support growth and has already brought forward
proposals for the New Homes Bonus. Local enterprise partnerships
will have a vital role to play in supporting pro-business approaches
and thus maximising the potential to benefit from such incentives.
35. The Government will continue to support local
enterprise partnerships as they develop, and will encourage sharing
of knowledge and best practice within the local enterprise partnership
community to support capacity building across the country. The
Government has announced a small local enterprise partnership
Capacity Fund to help partnerships develop their capacity. Further
detail will be announced in due course.
We believe that the transfer of RDA assets should
be assessed on a case by case basis. Given their potential importance
to future development projects, transfer should be expeditious
but should avoid any risk of a "fire sale" at a time
when land prices remain depressed. The process of disposal needs
to be transparent and should be open to scrutiny. If disposal
is used to pay off part of the national debt, the Government should
favour bidders who can demonstrate that their proposed use of
the relevant asset will benefit the local economy. We further
recommend that the wind-down plans of the RDAs be made publicly
available. (Paragraph 126)
36. The Government agrees that there should be
no "fire sale" of RDA assets and intends that disposals
will be assessed on a case by case basis. It accepts that the
disposal of RDA assets should be expeditious but it will be necessary
for RDAs to finalise assets and liabilities plans and for these
plans to be agreed before the systematic disposal of RDA assets
and liabilities can take place.
37. The Government agrees that the process of
disposal should be transparent and open to scrutiny. It has set
out the principles for RDA asset disposal in paragraphs 2.45 to
2.47 of the Local Growth White Paper. Included within these principles
are that decisions on disposals should be made based on the principles
in the RDA Act—to further the economic development and regeneration
of its area—and that consideration should be given to whether
the asset will prosper with the planned new owner. This means
the original strategic intention for acquiring the asset should
be considered before making a decision on disposal and a view
taken as to whether this will be achieved and built on by any
new owner.
38. Owing to the anticipated commercial sensitivity
of the RDA asset disposal plans, and the desire to achieve best
value for the taxpayer, it is not expected that they will be made
publicly available. However, the general principles upon which
decisions on the disposal of RDA assets and liabilities will be
made have already been set out in the Local Growth White Paper.
It is expected that further, more detailed guidance will be provided
to the RDAs, on an ongoing basis, in order to help them develop
their own assets and liabilities plans.
With business support funds necessarily constrained,
the Government must ensure proportionate support for all sectors
of the economy, consistent with its overall objectives. Where
the criteria for certain funding mechanisms, such as the £1
million threshold for the RGF, might effectively exclude certain
sectors, it has to ensure that other funding routes are clearly
identified. Furthermore, the RGF must be clearly demarcated from
major national infrastructure investments. (Paragraph 131)
39. Projects must meet the objectives and criteria
of the Fund whatever the sector. Proportional support for all
sectors would limit the effectiveness of the Fund in its delivery
of the core objectives to lever private sector investment, create
growth and sustainable private sector jobs. Where the projects
do not meet these objectives, bidders may look to the many other
funding mechanisms available to assist rebalancing the economy
such as the Green Investment Bank, the Business Growth Fund, the
European Regional Development Fund or access to finance initiatives.
No sectors are explicitly excluded and small and medium enterprises,
public/private partnerships or social enterprises can join together
to bid for packages of projects or programmes to meet the £1m
threshold. Infrastructure projects that unlock other business
investments that create growth and sustainable employment may
be supported.
The bidding process for the Regional Growth Fund
will need to be kept as simple as possible to allow less prosperous
areas and less well resourced projects to compete fairly. The
Independent Advisory Panel deciding on bids has to be alive to
this, and should take this into account. Looking behind the surface
to the potential of less well presented or even less well thought
out applications should be part of the Panel's role. (Paragraph
134)
40. The process is designed to be as simple as
possible. The only legitimate judgements that the Panel can make
concern the consistency of bids with the objectives and criteria
of the Fund. The Panel will see all applications and will take
into account geographic impacts, particularly for those areas
affected disproportionately by public sector cuts as well as value
for money.
POWERS AND ACCOUNTABILITY
LEPs will need to have clear powers to influence
and determine local authority policy or risk becoming nothing
more than talking shops. Such powers might usefully be set out
in a memorandum of understanding between the LEP and its partner
local authorities. While we understand the Government's reluctance
to set out a statutory framework for LEPs, we believe that agreement
on terms of reference for how such relationships will be built
would encourage sharing of best practice to the benefit of both
business and local authorities. (Paragraph 146)
41. The development of local enterprise partnerships
is a bottom up process and the days of centrally imposed dictates
are over. It is for partnerships to work out their own relationships
with member local authorities and Government will not impose a
particular model. The Government has provided a framework that
gives business the opportunity to have a defining role in these
partnerships, and to create a new more creative and productive
relationship with local authorities.
It is vital that all relevant Government Departments
fully support LEPs and, where appropriate, devolve power to them.
We recommend that the Government consider directing Departments
to prepare memoranda of understanding between themselves and LEPs
setting out a commitment to devolved power. Publication of those
memoranda would be an excellent first step on the road towards
greater consistency in relations between Departments and would
have the potential to incentivise LEPs to work for greater devolution
of power. (Paragraph 147)
42. Appropriate powers and functions will be
devolved to local enterprise partnerships but other powers and
functions will need to be co-ordinated or delivered at the national
level where there are significant economies of scale, where consistent
national delivery is important, and where benefits can be obtained
from a more expert, efficient and strategic approach. Where appropriate
the Government will work with local enterprise partnerships as
it recognises their importance in increasing economic activity.
The Local Growth White Paper has already outlined how local enterprise
partnerships can work with Government and how the Government will
engage with partnerships with regard to the powers and functions
they feel they need to deliver their economic vision. However,
there are currently no plans to produce memoranda of understanding.
A system as innovative as that of Local Enterprise
Partnerships must be subject to proper performance and value for
money review. To achieve that, it is critical that the Government
put in place measures for auditing the performance of LEPs based
on consistent data measures and criteria. We strongly discourage
the Government from recognising any LEP without insisting on full
local scrutiny—including by publishing of accounts and minutes
where appropriate and by giving local stakeholders the means to
question LEP boards. Furthermore, where LEPs are in receipt of
public funds we recommend that they be subject to an independent
and transparent auditing process meeting the minimum standards
required for NDPBs. (Paragraph 151)
43. The Government expects local enterprise partnerships
to maintain proper financial records. Where they are independent
bodies, and not subsidiaries of some other entity, they would
be expected to prepare their own accounts and to have these audited
by an independent external auditor in line with proper accounting
law and practice. If the local enterprise partnership has close
connections with a relevant local authority, then it might well
be appropriate for the local authority's auditor to audit the
accounts of the local enterprise partnership.
44. Where local enterprise partnerships receive
central government funds, the Government will of course have to
account to Parliament for this funding. Similarly, where local
authorities allocate funding to local enterprise partnerships,
they will need to account locally for this, and European funding
will need to be accounted for in line with EU rules. However,
local enterprise partnerships are not NDPBs like the RDAs were,
and will not be funded or performance managed in the same way
as RDAs.
45. Local enterprise partnerships will be accountable
locally through their local authority members, who can be questioned
by stakeholders, including about their activities through local
enterprise partnerships. Local authorities already have the power
to set up joint scrutiny arrangements where that would be more
effective.
LEPs will need to develop ways to meet the challenge
of changes to the local and national political landscape. In
order to facilitate this, we recommend that the Government consider
the establishment of an independent process for validating any
changes in LEP boundaries. (Paragraph 156)
46. All local enterprise partnerships are recognised
when they have met the Government's expectations regarding support
from business; economic geography; local authority support; ambition
and added value; and board membership. If during the lifetime
of the partnership there are changes to any of these, including
geography, then the Government will want to ensure that its expectations
are still being met. In the case of local enterprise partnership
boundaries, as set out in the Local Growth White Paper, the expectations
are that the geography should represent a reasonable natural economic
geography, be supported by business and the key local authorities,
and be reasonably strategic. Where changes result in this no
longer being the case then the partnership will be asked to address
the Government's concerns.
OVERALL CONCLUSIONS
Local Enterprise Partnerships offer a radical
new approach to local growth and the relationship between local
government and business. The partnerships face the challenges
of limited resources and the need to collaborate while maintaining
healthy competition. The Government also faces the challenge
of ensuring a successful transition to the new structure, respecting
local wishes while pushing for maximum national coverage of LEPs
so that no area is left behind. For LEPs to be a success, the
Government will also have to commit to devolving power where possible,
and supporting LEPs in their start-up period both through appropriate
financial support and retention of RDA know-how. (Paragraph 157)
All sides, including business, need to engage
to overcome the potential difficulties caused by local politics.
The Minister has himself acknowledged that there needs to be
a clearer focus on economic growth. A great deal of work and
creativity is required from all involved, but the prospect of
more vigorous, more responsive local economies is to be welcomed.
We plan to revisit this subject to see how the new structure
is developing, in a year to 18 months. (Paragraph 158)
47. The Government is pleased that the Select
Committee welcomes the prospect of more vigorous, more responsive
local economies. As this response sets out, the Government is
working to ensure a smooth transition to the new landscape. It
is a change which puts business leadership at the heart of local
economic development, and demands greater levels of innovation
and creativity from local authorities as they work with business
to create a more business-friendly local economy. Together with
reforms to the planning system, moves to improve the incentives
for local growth, and investment through the Regional Growth Fund,
the creation of the local enterprise partnerships is an important
step towards more dynamic local economies. The Government looks
forward to working with the Committee as it returns to this subject
in the future.
1 As at 8 February 2011. Back
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