Appendix: Interim Government Response
On 26 April 2013 the BIS Select Committee published
their report into Local Enterprise Partnerships. This document
sets out the Government's interim response. A further response
will follow the June Spending Round along with the publication
of the LEP Guidance for local Growth Deals and Single Local Growth
Fund.
Monitoring and Accountability of LEPs
The Committee makes a number of recommendations relating
to LEP accountability and monitoring by Government.
We agree that national economic growth relies
on strong regional growth and that LEPs are key drivers in that
respect. For that reason we believe that constant monitoring of
LEPs (and all elements of the Government's Plan for Growth, for
that matter) is essential. (Paragraph 13)
It is right that LEPs set their own objectives
and priorities and this should continue. We agree that centralised
and overly-prescribed objectives would go against the local and
regional purpose of LEPs. However, we have heard that there is
inconsistency between LEPs in terms of their objectives. Consequentially,
accountability may be at risk. We have already recommended that
a single BIS Minister be made responsible and accountable for
LEPs and that LEPs should have a single point of contact within
the Department. We recommend that through this streamlined channel
of communication, the Government monitors LEPs' objective setting
processes closely—against a minimum baseline of performance—to
ensure that all LEPs remain fit for purpose and have the capability
to access future funding. This would also facilitate the provision
of advice and best practice between LEPs and the Department. (Paragraph
55)
LEPs should have a significant impact on their
local community, indeed they would not be operating successfully
if they did not. We therefore recommend that LEPs develop a set
of benchmarks, relevant to their local economies, against which
communities can measure their success. These benchmarks should
be monitored by the Government and published in a form which is
easily accessible to the local communities. (Paragraph 58)
Although LEPs receive public money from central
government, we believe that it is right that they are free to
react to local issues. In fact, that is the premise upon which
LEPs have been set up. However this must not be an excuse for
an excessively handsoff approach from Government. Value for money
should be monitored and proven. We recommend that the Department
takes on a more active monitoring of LEPs and takes opportunities
(such as future funding bids and periodical reviews) to ensure
that value for money is being achieved. This scrutiny should be
proportionate to the scale of money involved and we further recommend
that the National Audit Office monitors this aspect of public
expenditure. (Paragraph 63)
There is a balance to be found between the accountability
of LEPs to public and private bodies. From the evidence received,
it appears that this balance is generally being met, but communication
between stakeholders can always be improved. We therefore recommend
that every LEP needs to demonstrate a commitment to engagement
with all of its stakeholders. We have heard examples of good practice
and believe that this should be led by LEPs themselves. Transparency
is key, especially when private groups and individuals have invested
money into LEPs. Accountability is best achieved through excellent
communication, transparency and lucidity. (Paragraph 66)
Government believes that to date, its approach to
LEP progress monitoring has been proportionate and does not accept
the recommendation that constant monitoring of LEPs is essential.
The Committee rightly recognises that it is for LEPs
to set their own objectives and priorities. Government believes
that LEP accountability is primarily to their local community.
The Budget response to the Heseltine Review[1],
sets out in detail below Government's view of how accountability,
including for financial propriety and value for money should be
delivered and how it can be strengthened through further devolution:
Para 2.37. Devolution of economic leadership and
growth funding to local leaders offers an important opportunity
to strengthen local democratic and financial accountability.
Para 2.39. Governance must be robust, proportionate
and transparent, and should draw on the recommendations in the
Department for Communities and Local Government (DCLG) report
Accountability: Adapting to decentralisation. Departmental accounting
officers are responsible for assuring Parliament that local spending
financed by government grants meets high standards, including
delivering value for money. To do this there must be a robust
local accountability system in place, with local Section 151 officers
and democratically elected councillors responsible for ensuring
that public money is managed with propriety and regularity, and
value for money.
Para 2.40. The Government will need assurance
that taxpayers' money is being spent well. This is why negotiation
on the strategic plan will be iterative, and the decision on both
amount and flexibilities that each area will receive will be bespoke.
Specifically, where places have not yet made the transition to
effective governance and joint working across the LEP area, there
will be central controls on how the Single Local Growth Fund can
be spent, based on the strategic plan and discussion process described
above, and a greater emphasis on central monitoring and evaluation.
Government will provide further guidance for LEPs
on this after the Spending Round on the development of their strategic
plans; this will include requirements for monitoring and evaluation
as LEPs take the strategic lead on the Single Local Growth Fund.
LEP Resources and Funding
We welcome the fact that Government has agreed
to provide core funding to LEPs for the next two financial years.
However, we are concerned that the timescale is too short to
allow LEPs to make longer-term investment. We therefore recommend
that the Government commits to core funding for LEPs and as a
priority sets the level of that funding for the five years following
2015. In the wider context, a consensus on long-term investment
should be developed across the political parties to deliver certainty
and confidence. (Paragraph 20)
We will publish a full response to this recommendation
after the June Spending Round.
We are not convinced by the Minister's argument
that that it is "too complicated" to assess the 39 LEPs
individually as regards to their funding requirements. A one-size-fits-all
approach is misguided because different LEPs face very different
investment barriers. When planning future core funding the Government
should consider allocation on a case-by-case basis to ensure the
most efficient use of public funds. (Paragraph 21)
The requirement to 'cash-match' public funding
has, in some cases, led to an overreliance on Local Authorities
as LEPs struggle to find other willing investors. We recommend
that in future funding rounds, the Government considers individual
LEP's funding arrangements to assess whether cash-matching requirements
are appropriate. In this respect it should take into account the
local economy, local government influence and the track record
of cash-matching in the area. (Paragraph 25)
As the Committee report concludes, Government has
responded positively to needs of LEPs for funding for its core
activities. A core offer of £250 k per LEP for each of the
two years 2013/14 and 2014/15, matched and in some cases exceeded
by local partnership resources is designed to support core functions
such as Chair and Board support and to enable the recruitment
of some dedicated executive resource. These are activities which
are common to all LEPs. This approach also responds to earlier
feedback from LEPs that bidding for individual sums of start-up
and capacity funding had been resource-intensive and burdensome.
The requirement for matched funding from local partners
is regarded as important in securing a balance between central
government funding and local partnership buy-in. In implementing
this requirement, we have included as eligible match, private
sector Board members' time, contribution on specific projects
and priorities as well as LA resources which are fully at the
disposal of the LEP. In implementing the second year of core matched
funding we will be asking LEPs to report on the matched resources
which have been available during the first year.
We support Lord Heseltine's recommendation for
a single funding pot and we welcome the government's acceptance
of it. However, greater detail is needed on how the various funding
streams will be brought together. We will expect the Department
to set out these details in its response to our Report. (Paragraph
22)
The Government accepts this recommendation. Details
of the Single Local Growth Fund will be set out in the Spending
Round to be announced by the Chancellor on 26 June. Following
the Spending Round announcement, Government will also publish
guidance for LEPs on Local Growth Deals, The Single Local Growth
Fund and the requirement for local economic strategies.
Revenue and finance raising powers for LEPs and
sharing good practice
The introduction of revenue-raising powers has
the potential to damage the reputation and standing of LEPs in
their local communities by transforming them into an unpopular
levy raising body with no democratic legitimacy. We do not, therefore,
recommend any formal revenue raising powers be granted to LEPs.
However, LEPs and interested parties need to be incentivised to
be innovative in attracting investment, for example with LEPs
being able to raise their own finance.
We have heard from witnesses and experts of specific
examples of such innovation and recommend that the Government
highlights best practice where it sees good marketing, promotion
and innovation. (Paragraph 28)
Government agrees LEPs should share best practice
and supports this through the facilitation of BIS Local who lead
BIS's relationship with LEPs. The LEP Network also has a role
to play in communicating LEP initiatives across the network.
LEPs and Government
LEPs remain unsure of where responsibility for
their work lies in Central Government. We conclude that this is
a clear result of the fact that responsibility for LEPs is shared
between the Department for Business Innovation and Skills and
the Department for Communities and Local Government. The Government
policy is to assign a named officer to be the contact for each
LEP—either from BIS or DCLG. This is confusing and inconsistent.
We believe that a single lead department is needed. We therefore
recommend that the Government appoints a single Minister, based
in the Department of Business, Innovation and Skills, who has
responsibility and accountability for LEPs. (Paragraph 34)
We also recommend that all LEP contact officers
are based in the BIS Department, either through staff transfer
or by inter-Departmental secondment. In addition to their responsibilities
to LEPs, contact officers should be tasked with facilitating all
Government Departments' support for LEPs. (Paragraph 35)
Government does not support the recommendation for
a single lead Minister with accountability for LEPs. This would
put at risk the benefits of having joint ministerial responsibility
and commitment to local growth with a range of Departments, reflecting
the reality that the drivers of local growth include among other
things, transport, infrastructure, energy, planning, skills, innovation
and access to finance.
To further strengthen the commitment to local growth
across Government, the Deputy Prime Minister (DPM) Nick Clegg
has announced the new creation of a new Cabinet committee—the
Local Growth Committee. The Local Growth Committee will bring
together the Secretaries of State from all the key economic departments,
bringing together the ministerial groups previously chaired by
the DPM on the Regional Growth Fund (RGF) and City Deals. It will
provide oversight across the local growth agenda to drive jobs
and growth across England.
It will include consideration of issues such as the
implementation of the 1st wave of City Deals, signing off the
2nd wave of City Deals and allocation of RGF money. It is also
likely to discuss the design and implementation of the Single
Local Growth Fund and look at cases where infrastructure policy
could impact upon particular localities.
The DPM will chair the committee with Chancellor
George Osborne as deputy chair. Other members will include Vince
Cable, Michael Gove, Eric Pickles, Ed Davey, Patrick McLoughlin
and Danny Alexander. The Committee will meet on ad-hoc basis but
intends to meet for the first time before the summer recess.
At local level we recognise that that Government's
interface with LEPs must be expertly managed, to secure joined
up responses to LEP issues. Government has accepted Lord Heseltine's
recommendation for Local Growth Teams to enhance and mobilise
support from across departments in support of LEP growth priorities,
this builds on the success of BIS Local in providing effective
relationships between LEP and Government. Each LEP also now has
a nominated Senior Whitehall Sponsors from across the economic
departments , supported by BIS Local, Sponsors engage with their
LEPs at a strategic level and provide both challenge and support
for the Chair and Board.
LEPs and Board Membership
The evidence supports the view that LEP boards
should properly reflect the local area. However, we note that
the balance between board size (manageability) and optimal representation
is not always easy to achieve. While Government guidelines go
some way in outlining expectations, LEPs should ensure that the
interests of the following are represented:
- Small or medium enterprises;
- Large businesses;
- Local employees (for example a Union);
- Local government; and
- The education sector (see next recommendation).
We have heard that LEPs can struggle to find representatives
from local businesses, particularly small and medium enterprises.
To achieve this Chambers of Commerce, small business organisations
and trade organisations could be actively targeted for representation
on LEP boards. (Paragraph 49)
This is primarily a recommendation for LEPs to pursue.
It is up to LEPs who is on their boards and Government encourages
effective involvement of stakeholders. This may be through the
main board or sub-groups looking at specific policy areas.
A real strength of the LEP model has been its ability
to attract strong private sector leadership and there has consistently
been a high quality field of applicants for Board appointments.
The business voice, including that of small business,
is of key importance and LEPs have developed strong SME engagement
through a range of mechanisms. In many cases, members of the local
FSB and local Chambers of Commerce are on LEP Boards.
Government has specifically supported wider business
engagement through capacity and start-up funding—ongoing
core funding will also help LEPs continue to do this.
LEPs and Skills
We believe that skills should be a core priority.
While we acknowledge that many LEPs have got the balance right,
and note the government guidelines on the subject, we have heard
that some LEPs need to refocus. We therefore recommend that LEPs
be required to demonstrate their levels of engagement with local
education, in particular with skills and apprenticeship providers,
FE colleges and schools. (Paragraph 50)
The Government accepts this recommendation.
It is up to LEPs to determine the priorities for
their areas. Some skills elements will be included in the SLGF
and LEPs will have to provide details of how they intend to deliver
their strategic plans.
The Government is committed to putting control over
the skills system in the hands of employers and learners and ensuring
that the skills system is responsive to the skills needs of local
communities to support growth and jobs. We have put £340m
directly in the hands of employers through the Employer Ownership
of Skills Pilot and will support demand from learners aged 24+
through Advanced Learner Loans.
In response to Lord Heseltine's report, the Government
stated that a skills system that is responsive to local needs
can help drive economic growth. To ensure that local businesses
can shape the pipeline of talent emerging from local further education
(FE) institutions, at Autumn Statement 2012, the Government agreed
that LEPs would have a new strategic influence over skills policy
in accordance with Lord Heseltine's analysis. LEPs will be responsible
for setting local skills strategies and will work with the FE
providers to agree how those priorities will be delivered. LEPs
have a number of levers to strengthen their engagement with providers—for
example Chartered status for FE colleges is now dependent upon
having taken into account the skills priorities of local LEPs.
The Government is reforming the delivery landscape so that employers
have direct influence over qualifications and learning programmes
and by ensuring that businesses and LEPs are represented strongly
on college governing bodies.
LEPs and the Local Economy
We recommend that the Department and the Minister
gather the information required to assess both how well LEPs match
current functional economic market areas and also the impact of
having overlapping LEPs. It should do this as a matter of urgency.
(Paragraph 41)
Government upholds the principle that the determination
of LEP boundaries rests with local partnerships themselves. The
Budget response to the Heseltine Review states that:
Para 2.71 In a small number of cases since their
inception, LEPs have amended their original boundaries. The Government
will not stand in their way if, in the light of experience and
their enhanced role, LEPs want to make further changes, subject
to support from business, from civic leaders and an assessment
that this represents a significant functional economic area.[2]
Business and civic leaders are best placed to understand
how their local labour markets and their economies work in practice
and where there are important linkages that cross local authority
and other LEP boundaries. This approach to LEP boundaries has
resulted in a number of overlaps and varying scales of LEP areas;
this reflects economic reality. LEPs have developed significant
flexibility and innovation in partnership and collaborative working.
Where there are overlaps in geography or where an economic opportunity
spans more than one LEP area, pragmatic solutions have been agreed
which work on the ground.
1 Government Response to the Heseltine Review,
Cm 8587, March 2013, pp46-47 Back
2
Government Response to the Heseltine Review, Cm 8587, March
2013, p.51 Back
| 
