The Chamberlain News

A year after Michael Heseltine unveiled his ‘single pot’, MPs tell political parties it’s time to stand up for LEPs

A year has passed since Lord Heseltine issued his report which urged the Government to establish a £49 billion single pot fund that would be administered by Local Enterprise Partnerships and drive growth in the regions.

Chancellor George Osborne accepted in principle almost all of Lord Heseltine’s proposals around devolving budgets and powers from Whitehall to LEPs, but when an announcement came about the growth fund it disappointingly turned out to be a very small pot indeed.

Mr Osborne’s largesse extended to £10 billion spread over five years – £2 billion a year for the entire country.

Since that point, paradoxically, more and more has been expected of LEPs despite their limited budgets and absence of much in the way of administrative support or executive powers.

They are obliged to produce multi-year strategic economic plans that will form the basis of negotiations with the Government for a share of the newly established Single Local Growth Fund. This may open up, potentially, the prospect of wider freedoms and flexibilities for the LEPs.

LEPs are also expected to provide strategic direction for the expenditure of European Structural and Investment Funds.

But all is far from clear about the precise nature of the beasts that replaced regional development agencies. Indeed, the emergence of LEPs, to quote Business Secretary Dr Vince Cable, has appeared to be a little Maoist in nature – or as critics might put it, they are making it up as they go along.

Crucially, with the next General Election a year and a half away, none of the main political parties is saying much about the future of LEPs post-2015, if indeed these organisations have a future.

LEPs are private sector-led, in theory at least, with a majority of business representatives on their boards able to outvote the politicians. There has, however, been a slow but clear shift towards making LEPs more accountable by brining them under the direct control of local councils.

The Greater Birmingham and Solihull LEP (GBSLEP) is now overseen by a supervisory board consisting of council leaders representing Birmingham, Solihull, Lichfield, Tamworth, East Staffordshire, Bromsgrove, Cannock Chase, Redditch and Wyre Forest.

Anecdotal evidence suggests a certain amount of confusion about the exact role of the LEPs, and as far as GBSLEP is concerned there is always lurking in the background the threat of disagreement between politicians and business leaders.

And while the GBSLEP board can boast some genuinely big names – Andy Street, the John Lewis chief executive, and Steve Hollis, the former Midland chairman of KPMG as well as JLR operations director Alan Volkearts  – business leaders in Birmingham admit privately that they are not satisfied with progress so far, and go so far as to question the Labour-led city council’s long-term commitment to GBSLEP.

On paper, the achievements section on GBSLEP’s website looks impressive. It includes the successful conclusion of the City Deal, securing £12 million to establish an institute of translational medicine, two Regional Growth Fund bids totalling £85.7 million, £125 million for the Advanced Manufacturing Supply Chain Initiative, and £60 million for the redevelopment of Paradise Circus in Birmingham.

These achievements, however, could and arguably would have been delivered by Advantage West Midlands had the coalition government in one of its first decisions not abruptly scrapped regional development agencies.

A huge question mark arises over the suitability of GBSLEP as an economic entity.  The organisation is a strange mix of urban Birmingham and Solihull with a collection of rural authorities tagged on because they are “in the Birmingham travel to work area”.

The reality is that GBSLEP was never much more than an unsatisfactory compromise cobbled together after it proved impossible to unite Birmingham and the Black Country councils in a LEP that would actually have reflected the region’s economic might.

Discussions about the possibility of merging GBSLEP and the Black Country LEP are being promoted by Birmingham council leader Sir Albert Bore, but few people give the talks much chance of succeeding such is the historic enmity between the rival areas.

Meanwhile, a little-publicised by the All Party Parliamentary Group inquiry into LEPs makes the case for a united cross-party approach to local enterprise partnerships. In particular, the APPG urges the Labour Party to come off the fence before the next election and state exactly what future it envisages for LEPs.

The report notes: “Whilst recognising that many LEPs – and Government – have a long way to go, this All Party Group has consistently put forward the view that institutional stability, beyond the electoral cycle, is critical in giving LEPs the platform to succeed.

“Participants expressed the common perception that LEPs, local authorities and business were not yet certain about the role of LEPs under a new Government, despite the assurances provided by the Shadow Business Secretary that a Labour government would retain and reform LEPs to allow them to play a bigger role.

“However, messages are still mixed. The shadow transport secretary has stated that LEPs would not be invited to bid for local transport funds under Labour, endorsing the principle of devolution and expressing ambition to devolve further but citing concerns about LEPs’ democratic accountability.”

The report continues: “LEPs’ strength as institutions is at the heart of this issue, and it should be recognised that the current picture is mixed. Many LEPs can now show tangible achievements – such as the extent of private sector funding leveraged in for infrastructure projects through the Growing Places Fund.

“Meanwhile, however, there is continuing doubt about the extent to which many LEPs truly reflect functional economic areas.”

The APPG report quotes research by the Centre for Urban and Regional Development Studies (CURDS) at Newcastle University which the MPs say “provides a somewhat downbeat assessment” of LEPs.

The CURDS report cites the Government’s” inconsistent approach to localism, unresolved issues about whether the LEPs are competitors or collaborators, the risk of function creep and bureaucratisation, LEPs’ limited resources and the need for a collective LEP voice”.

It concludes:  “Given the lack of long-term vision and strategy for their strategic development, the fundamental tensions yet to be resolved and their institutional deficits in authority, capability and resources, at this stage in their evolution the LEPs will struggle to exercise substantive influence upon local economic growth.”

The APPG inquiry says the Single Local Growth Fund “should have as few strings attached to it as possible” and adds: “It was noted by some that the process by which the initial SLGF was allocated through negotiations between HM Treasury and individual departments was not joined-up or outcome-focused.

“Reforming this will be crucial in the long-term to shifting the centre of gravity on economic growth to the local level. The radicalism of such a move, and the scale of the cultural challenge that it will present for Whitehall, are not to be underestimated.”

The APPG inquiry makes the following recommendations:

• The What Works Centre for Local Economic Growth should help LEPs build capacity to carry out place-based, holistic economic appraisal of potential investments and demonstrate their impact.
• In addition to continuing to build on increasingly fruitful individual relationships with Government, LEPs should establish a collective voice on common, agreed issues in order to demonstrate value in 2015 and beyond.
• Government should use the Local Growth Deal process to identify LEPs with limited capacity and equip local growth teams to work with the LEP Network to provide capacity building assistance.
• Building on the success of the Cities Policy Unit, Government should create a single cross-departmental team to handle Local Growth Deals and support the Local Growth Committee.
• All political parties should make a prominent manifesto commitment to working with LEPs after 2015 to avoid destroying confidence and partnership capital.
• Government should include an explicit mention of working with local partners in the proposed duty to promote economic growth within the Draft Deregulation Bill and invest resources in communicating the duty to public bodies.
• The Government should add to the Single Local Growth Fund at each Spending Round, with the Regional Growth Fund an obvious target, while funding streams remaining outside the SLGF should work as far as possible to the same timescales, assessment criteria and reporting requirements.
• The Government should allocate money to the Single Local Growth Fund up front, rather than negotiating with departments on particular funding streams, and challenge departments to ‘use it or lose it’.
• The Government should put in place longer term settlements for overall local government budgets, to encourage public investment in growth.
• LEPs should put in place light touch formal arrangements to ensure transparency, with an emphasis on local accountability, while Government should ensure that its reporting and compliance requirements are minimal, proportionate to LEPs’ ability, streamlined across Government and structured in a way which actively helps LEPs to deliver.
• LEP Chairs should have the opportunity to appear in front of the Public Accounts Committee where appropriate, to demonstrate that a locally-led approach to growth investment can evidence value for money and stand up to public scrutiny.
• LEPs should consider whether their accountable body arrangements are adequate for their new responsibilities, and share their accountable body agreements publicly to help all LEPs achieve the best balance between transparency and speed of action.
• LEPs should improve communications with businesses, look to engage experienced private sector business people who are representative of local business demographics, and look to reduce bureaucracy and support businesses through resources such as the  ‘Better Business for All’ tool.
• LEPs should consider succession planning for private sector representation on LEP boards.
• Where necessary, LEPs should work with Government to take up their offer of changing LEP boundaries to reflect functional economic areas, while the What Works Centre could usefully assist in defining functional economic areas more practically and clearly.
• Local authorities should go further and faster in pooling economic development resources (including relevant transport and planning policy functions) across LEPs and  agree a common approach to economic analysis to get buy-in from all partners for  investment decisions.
• Whilst this does not fit every area and must be based on genuinely strong partnerships, local authorities should consider whether a combined authority or joint committee structure could free up business representatives to focus on areas where they can most add value.
• LEPs should look to engage more backbench councillors through working groups and other mechanisms, while the Local Government Association should work with the LEP Network to run a major engagement campaign for councillors on local growth and LEPs.