The New Local Enterprise Partnerships

Memorandum submitted by the National Housing Federation

The National Housing Federation represents 1,200 not-for-profit housing associations in England, and is the voice of affordable housing. Our members provide two and a half million homes for more than five million people. The Federation welcomes the opportunity to provide evidence to the Business, Innovation and Skills Select Committee’s timely inquiry into the New Local Enterprise Partnerships.

The Federation operates on a regional basis, enabling us to work more closely with our members. Regional committees oversee the Federation’s work in each region. We facilitate the representation of housing associations in regional structures. In the past, this has included housing representation on Regional Assemblies, and working closely with RDAs and more recently, Leaders’ Boards. We therefore feel well-placed to comment on the proposed new Local Enterprise Partnerships.

Summary of the Federation’s evidence to the Committee

· Housing and economic development are interdependent and must be viewed together

· Local Enterprise Partnerships should set out a housing and planning strategy for the area they cover

· There is a need for coordination at a level between LEPs and national government

· Civic society should be represented on LEP boards, and this should include housing associations as successful local social enterprises

· LEPs must cover spatial areas large enough that they can act strategically,

· New structures should ensure that the needs of rural communities are not overlooked

· Transitional arrangements are important at a critical time for the economic recovery. This can best be managed by establishing slimmed-down regional residual bodies and a dedicated funding stream for LEP set-up.

Recommendations the Committee should consider including in its report

1. Local Enterprise Partnerships should be charged with developing a planning strategy and housing strategy for the area they cover

2. Slimmed down regional residual bodies should be encouraged where there is local support, and where they exist should take on the overseeing of European Regional Development Fund allocations.

3. Government should make clear that it expects to see civic society and social enterprise representation on LEPs.

4. The Committee should request clarification from government on the expected membership of LEPs, and ascertain how LEPs which are conterminous with a single upper tier authority would add value or be able to plan and act strategically

5. The Committee should consider the case for additional funding or support for LEPs in rural areas to ensure the gap in productivity and housing provision between urban and rural areas does not widen.

6. A time-limited funding stream should be established to enable the transition from Regional Development Agencies to LEPs, with the LEP partners taking responsibility for funding their partnership in the longer term.

7. The Homes and Communities Agency should be charged with managing and developing regionally significant sites currently in RDA ownership.

Detailed evidence

Housing and economic development

Housing and economic development are interdependent, and must be viewed together. Investment in housing creates substantial economic value. By contrast, failure to plan and invest in affordable accommodation affects access to skilled workers, the mobility of the workforce and undermines business and public services.

Investment in affordable housing creates value for the rest of the economy. Modelling by Oxford Economics demonstrates that due to the economic multiplier effect, for every £1 spent on house building, £1.40 in gross output will be generated across the economy as a whole1.

Housing associations are also key employers. Housing associations employ over 144,000 people and help create hundreds of apprenticeship opportunities each year.

Demand for new housing is rising. Government projections suggest nearly

258,000 new households will form every year in England from 2006 to 20262. However, while demand for housing is growing, supply is falling, with fewer than 60% of the new homes England needs being built each year3. Housing associations are doing their best to buck the trend, completing and starting work on more homes each year. But if the Government’s vision of a private-sector led economic recovery is to take place, we must plan and build more housing of all tenures, and this must be closely linked to planning for economic growth.

Failure to plan and invest in affordable housing affects the mobility of the workforce. Lack of supply means tenants cannot move to secure employment or take up better work. The economic cost of tenant immobility is estimated conservatively at £542 million per annum. By far the largest part of this estimate relates to the £305 million cost of tenants being unable to act as carers for relatives, but some £48 million relates to tenants who wish to move to secure employment but are unable to do so, and a further £18 million is lost to the economy based on tenants who wish to move to take up better work but unable to do so.4 The British economy cannot afford these figures to grow. Workforce mobility will be a key component of private-sector led economic growth, and with the current housing need, this means increasing housing supply in the right places.

Functions of the new Local Enterprise Partnerships

The letter sent by the Secretaries of State for Business, Innovation and Skills and for Communities and Local Government to local authority leaders on 29th June this year5 set out the role of Local Enterprise Partnerships (LEPs) as providing strategic leadership in their areas to set out local economic priorities. The letter went on to suggest that issues to be tackled by LEPs would include:

· Planning and housing

· Local transport and infrastructure priorities

· Employment and enterprise

· Transition to the low carbon economy

The Federation is pleased to see that the Secretaries of State see planning and housing as an issue for LEPs to tackle. Whilst we respect the Government’s decision to act swiftly to abolish Regional Spatial Strategies, as per manifesto commitments, we remain convinced that there remains a need for a ‘larger than local’ planning function.

Such a function will be necessary to deliver the Government’s objectives in terms of economic development and related housing provision, not to mention the Government’s environmental, infrastructure and sustainable development objectives.

RECOMMENDATION: The Federation believes that LEPs should be charged with developing a planning strategy and housing strategy for the area they cover. This strategy should make an assessment of housing need in the area covered by the LEP and set out how the partners intend to meet it. Such strategies need not result in any loss of local control – they could be agreed on a consensual basis between LEP partners, but once agreed should be binding. The LEP should have some powers to aid cooperation over implementation once the plans are agreed.

We believe such a strategy is essential to ensure that housing and other infrastructure provision is made to support economic development. In a constrained fiscal climate, strategic planning is of enhanced importance in order to ensure resources are appropriately prioritised.

The Regional Growth Fund, and funding arrangements under the LEP system 

We understand Government has committed £1bn, from within the existing spending envelope, to the Regional Growth Fund (RGF) to support activity that has the greatest impact on sub-national growth.

The RGF is currently subject to a joint consultation run by the Treasury, BIS and CLG. The Federation is concerned that RGF as currently envisaged is structured in a way that benefits large well-established partnerships to the detriment of smaller LEPs. We believe several issues need to be resolved as a result of the consultation:

· How the RGF will integrate with existing funding streams like the European Regional Development Fund (ERDF)

· How RGF will be allocated between LEPs, in particular ensuring that need is taken into account and that the bidding process is not dominated by stronger LEPs, thereby reinforcing existing disparities

· We understand the first bidding round for RGF will commence this December. We are concerned that this leaves very little time for LEPs to develop proposals and therefore those with large pre-packaged bids

The Federation welcomes the inclusion of social enterprise in the funds aim to create additional sustainable private sector growth. We believe this inclusive approach presents real opportunities, and our members look forward to working with partners on innovative and exciting bids to the fund.

The Federation believes the RGF could have an important role to play in supporting the Government’s proposal for a ‘Green Deal’. The Green Deal is likely to produce a significant number of new jobs in the green construction and refurbishment sectors, an area where housing associations have a good deal of expertise. Our members are already working with RDAs to ensure that ERDF funds are used to conduct energy efficient refurbishment of existing social housing stock. RGF could augment existing ERDF funding to expand this programme, or to ensure that the materials required can be manufactured and sourced locally.

Government proposals for ensuring co-ordination of roles between different LEPs and co-ordination of regional economic strategy

We are not aware of any proposals from Government for coordinating roles between different LEPs. However, in some regions – notably the North West, Yorkshire and Humber, and the North East – there appears to be enthusiasm for slimmed down regional residual bodies to undertake high-level strategic functions and make the case for investment in those regions6.

The Federation would support such bodies, which we believe could fulfil a useful function, particularly around regional-level support, coordination and distribution of

funding. The Federation believes that is neither practical nor desirable for coordination of LEPs (at the scale they are proposed) to take place in Whitehall.

Coordination between LEPs is necessary as emerging LEPs may not reflect functioning economic areas, travel to work areas or strategic housing market areas. There will be regionally significant strategic developments which are interdependent with developments in neighbouring LEPs – for example, an industrial estate development in one LEP which relies on infrastructure such as access roads being developed in the LEP next door, or a new housing development intended to house those who will work in the neighbouring authority. Many of these strategic developments take years to emerge and their interdependence should be supported.

We believe residual bodies could have an important ongoing role in coordinating access to the European Regional Development Fund. ERDF has been managed by the RDAs and overseen by programme monitoring committee representing the key stakeholders in the region. A residual regional body could incorporate this role with minimal disruption or transition.

The Government’s stated aim of reducing bureaucracy is laudable, but the replacement of one RDA with several LEPs carries an inherent risk of duplication of staffing and back office functions. We believe the retention of a slimmed-down residual regional body could allow for effective sharing of resources between LEPs and avoid such duplication. At a time when local authorities are increasingly looking to share key staff and services, whilst retaining their individual arrangements for governance and accountability, it would be perverse if existing cross-boundary services were broken up and duplicated, especially in light of current funding constraints.

RECOMMENDATION: Slimmed down regional residual bodies should be encouraged where there is local support, and where they exist should take on the overseeing of ERDF allocations.

Structure and accountability of LEPs 

The Government’s consultation on the Regional Growth Fund states that it will be crucial for partnerships to achieve strong business engagement, operating on the basis of ‘equal partnership’ between local authorities and business, with a private sector chair in most instances.

Whilst the Federation agrees that strong business support for partnerships is essential, we also believe that civic society and social enterprise should be represented on LEPs. It would be inconsistent with the Government’s stated aim of building a ‘big society’ if such organisations, which include housing associations, were not included in these partnerships. It would also be inconsistent with the stated aims of the Regional Growth Fund, which includes the social enterprise within its definition of private sector growth. The Government sees an important role for civic society in the delivery of public services, large numbers of people are employed by social enterprises and they have a key role in the provision of apprenticeship and back-to-work opportunities.

RECOMMENDATION: Government should make clear that it expects to see civic society and social enterprise representation on LEPs.

The letter sent by the Secretaries of State to local authorities on 29th June states that "To be sufficiently strategic, we would expect that partnerships would include groups of upper tier authorities"7. The Federation agrees that LEPs must be strategic bodies, covering a large enough spatial area that they can plan and act strategically. However, since that letter was published, authorities have been advised that LEPs could cover just one upper-tier local authority, and indeed several authorities are preparing proposals along these lines8. The Federation believes it is unlikely that partnerships covering such small areas can be sufficiently strategic.

RECOMMENDATION: The Committee should request clarification from government on the expected membership of LEPs, and ascertain how LEPs which are conterminous with a single upper tier authority would add value or be able to plan and act strategically.

It is natural that areas with strong existing partnerships will be well placed to develop effective LEPs at an early stage. Intelligence from the Federation’s members and regional managers suggests this is the case, with existing sub-regional partnerships such as the Tees Valley MAA authorities, the Leeds City Region and the Association of Greater Manchester Authorities already advancing LEP proposals.

City Regions have demonstrated the value of cross-boundary cooperation between local authorities, based on an agreed governance framework. For example, the Birmingham, Black Country and Coventry City Region has agreed a Multi Area Agreement around jobs and skills9 – exactly the sort of economic development activity the Government wishes to see LEPs advancing.

However, it is important to recognise that areas with strong existing sub-regional partnership arrangements tend to be large conurbations10. The Federation is concerned that partnerships in rural areas are generally far less advanced, and that LEPs in these areas may prove slower to develop and lack capacity, at least in the short term. This is unfortunate, given that rural areas already have lower productivity per capita than urban communities11 and house price to salary ratios are wider12. There may therefore be a case for additional funding or support for LEPs in these areas to ensure that this gap does not widen.

RECOMMENDATION: The Committee should consider the case for additional funding or support for LEPs in rural areas to ensure the gap in productivity and housing provision between urban and rural areas does not widen.

The legislative framework and timetable for converting RDAs to LEPs, the transitional arrangements, and the arrangements for residual spending and liability of RDAs 

We know that the Government intends to introduce legislation as part of the Decentralisation and Localism Bill. Details of the framework and timetable are expected to emerge in the forthcoming White Paper on LEPs. The Federation believes a swift transition with maximum continuity is desirable, hence our support for slimmed-down regional residual bodies.

We are not aware of any funding to support the development of LEPs, and therefore assume that government expects their running costs to be funded by their sponsor organisations, principally local authorities. Whilst this will reinforce the strong relationship between local authorities and LEPs which the government wishes to see, in a period of fiscal restraint it also makes LEPs reliant on diminishing local authority budgets. The Federation is concerned that this may result in LEPs which lack the capacity and profile to attract outside funding and deliver local economic renewal. We therefore RECOMMEND that a time-limited funding stream is established to enable the transition from RDAs to LEPs, with the LEP partners taking responsibility for funding their partnership in the longer term.

We recognise that in areas that do not retain a residual body, the assets, liabilities and on-going spending commitments of existing RDAs will need to be apportioned. The Federation believes there may be a role for the Homes and Communities Agency to play here, particularly around the use and development of regionally-significant sites currently in RDA ownership. The value of unused land owned by RDAs was estimated at 31st March last year at £268million13. These sites could make a significant contribution to economic growth and housing supply, and it would be unfortunate if their development was delayed in a protracted period of negotiation and reorganisation (it has been suggested that LEPs may not start operation until March 201214). We believe the HCA is an agency with the track record, skills and existing partnerships necessary to manage the development of complex strategic sites like those in RDA ownership.

RECOMMENDATION: The Homes and Communities Agency should be charged with managing and developing regionally significant sites currently in RDA ownership.

Means of procuring funding from outside bodies (including EU funding) under the new arrangements

RDAs have managed the allocation of several streams of funding, not least European Regional Development Funds. These funds will continue to be allocated by Europe at existing spatial levels – e.g. the nine English regions. The Commission will also continue to expect match-funding for ERDF allocations.

The Federation believes it would be desirable for the existing Programme Monitoring Committees to continue to function at regional level – preferably as part of a regional residual body, or at the very least as a joint committee of the LEPs in each region. This would ensure that bids are coordinated within regions and that prioritisation can occur at a local rather than national or European level.

Given the complexity of the funding streams concerned, it is unlikely to be possible, or cost-effective, for every LEP to have a dedicated resource to manage these programmes. It would therefore be preferable, and consistent with the localism agenda, for this function to be performed regionally rather than funding bids being considered in Whitehall or Brussels.

13 August 2010