The Chamberlain News

Everything you need to know about LEPs, regional government and grand devolution promises

It is almost 30 years since the West Midlands County Council disappeared along with the other English metropolitan counties and the Greater London Council, sacrificed on the altar of Thatcherite mistrust of local government.

Since then Governments of various political shades – Labour, Conservative and today’s Tory-Lib Dem coalition – have wrestled, most unconvincingly at times, with the pressing matter of what to do about regional administration.

Who in the West Midlands should take responsibility at a strategic level for planning, housing, economic development, transport and skills. And just as importantly, how much of the funding to deliver agreed priorities should be handed down by national government and what proportion should be generated locally? These are the issues that grind round and round in a never ending circle of indecision and unmet promises.

The matter of funding leads naturally to fundamental questions about democracy and accountability. If Whitehall sets the budgets and approves or disapproves of major capital projects, as has so often been the case since the 1980s, is there really any such thing as local decision making?

Who now remembers the early days of Tony Blair’s 1997-2001 government and the Your Region Your Choice debacle? This was John Prescott’s attempt to persuade the English regions that they really should have their own assemblies, just like Wales and Scotland.

Prescott and Blair chose the three regions where support for a directly elected assembly was thought to be the greatest – the North-east, North-west and Yorkshire and Humberside.

Tony Blair put it like this in an introduction to the regional government white paper: “This gives people living in the English regions the chance to have a greater say over the key issues that affect them as well as the power to devise tailored regional solutions to regional problems.

“And it builds on the success of devolution elsewhere in the UK – offering people more accountable, more streamlined, and more joined-up government.”

It turned out that the people weren’t sold on the prime minister’s promise of joined up government. Referendums in all three of the pilot areas resulted in decisive majorities against regional government, even in the North-east where it had been supposed that the Geordie sense of identity and community would produce a huge ‘yes’ vote.

Looking back now, it seems likely that public disenchantment with Your Region Your Choice was driven by several factors. The most prominent of these was the suggestion that regional assemblies were really part of a plot to turn England into a satellite of the European Union, eventually doing away with the Westminster parliament and transferring ultimate power to Brussels.

There may also have been some disquiet because the assemblies were closely linked to Regional Development Agencies, somewhat unfairly regarded as over-bureaucratic and another wasteful layer of government. The assemblies, had they ever got off the ground, would have taken responsibility for running the RDAs.

The Blair government, in preparation for elected regional assemblies, set up shadow organisations in the shape of appointed regional assemblies in 1999, including one covering the West Midlands. The assembly stretched far and wide and represented Staffordshire, Shropshire, Worcestershire and Warwickshire as well as the seven West Midlands metropolitan councils.

It consisted of 100 members made up of 68 local councillors, 16 representatives from the business community and 16 from other interest groups including trade unions, environmental organisations and universities.

The West Midlands Regional Assembly had no executive powers. Its main duty was to scrutinise the activities of the regional development agency, Advantage West Midlands, although the assembly was latterly given responsibility for drawing up the regional spatial strategy setting out targets for house building and industrial development.

Assembly meetings were dominated by in-fighting and disagreements between various factions representing Birmingham, the Black Country and the Tory-controlled shire counties. It was abolished in March 2010, and was not missed.

The regional development agencies fell foul of the Conservative-Liberal Democrat coalition and were abolished in 2010, although they would probably have been scrapped anyway by Labour.

Where are we now with regional government? Local Enterprise Partnerships have assumed the mantle of the RDAs, taking responsibility for economic development. There are 39 LEPs in England including six in the West Midlands.

The LEPs must have a majority of business representatives on their management boards, thereby leaving elected local councillors in a minority.

But the precise relationship between elected councillors and business representatives is being challenged by the Greater Birmingham and Solihull LEP (GBSLEP) where it is proposed that a supervisory board of council leaders oversee LEP policy and decisions in future. The extent to which the supervisory board would be able to direct the LEP has not been made clear.

In 2012 it appeared that the LEPs might yet evolve from embryonic bodies with tiny budgets into powerful well-funded organisations given substantial funding and freed from the shackles of Whitehall. Veteran Tory grandee Lord Heseltine, an arch interventionist during the Thatcher governments, was appointed by the Chancellor, Geroge Osborne, to produce a report setting out how the performance of regional economies could be improved to match that of London and the South-east.

His report characteristically recommended transferring huge tranches of Government money into a Single Pot and handing it to the LEPs, which would then use local business knowledge to spend the cash wisely on all manner of regenerative projects.

Lord Heseltine said a single funding stream for LEPs would provide business leaders with the “flexibility to spend the budgets on priorities relevant to local circumstances as agreed with central government”. He recommended £49 billion for the 39 LEPs over a four-year period, plus about £10 billion of European funding.

The government accepted in the single pot and also supported Lord Heseltine’s decision to work closely with GBSLEP and Birmingham City Council to see how direct funding might work in practice. He produced the setting out plans for substantial investment and job creation in and around Birmingham Airport and the M42 corridor.

If anyone really thought that the single pot would amount to £49 billion or anything approaching that figure, they were to be sadly disappointed by Mr Osborne, who in the latest spending round confirmed that the pot, now more resembling a thimble, would be £10 billion split into £2 billion a year across the country. The sum is slightly less than the annual funding distributed to the former RDAs.

The Chancellor indicated that he approved of devolution in principle, adding: “Our philosophy is simple: trust people to make their own decisions and they will usually make better ones.”

However, despite Mr Osborne’s apparent enthusiasm for change, local decision-making such as it is will have to take place without substantial budgets for the time being.

It appeared at first glance that the Treasury hawks had won the day, supported on this occasion by Vince Cable, the Business Secretary, who commented that he didn’t want to see LEPs turn into “crypto regional development agencies”.

Mr Cable told the Local Government Association conference that he had become a “poster boy” for “Whitehall control freakery.” He added that the amount of money handed to LEPs “was important, but it is not the only thing that is important”.

The negotiated process between LEPs and central government to secure local growth deals would be as important, he said, and would be closely based on the negotiated process of the existing city deals.

Mr Cable added: “The whole point of the city deal system is that it is about supporting local initiative and growth and decision making through the negotiation process. We learn from local government about what they think they can do and we adapt the process accordingly.

“The big win that we think we are beginning to get to from that process is local dynamism, of great confidence amongst local leaders that they can do something about local growth in their local areas and that is partly about money but it is partly about sharing ideas about how you get local growth.”

And in what may turn out to be a significant announcement for Birmingham, Mr Cable also indicated the government was “flexible” about the possibility of LEPs merging to create bigger bodies.

A plan to merge GBSLEP and the Black Country LEP to create an organisation more closely related to the West Midlands’ economic footprint is being discussed by council leaders, although there is already dogged resistance from some Black Country authorities.

It should be noted that Mr Cable issued an important caveat: “We would be nervous if LEPs became gargantuan and approximate to the RDAs. They were too big and too remote.”

The Chancellor’s single pot announcement prompted diplomatic responses from key GBSLEP players.

Birmingham City Council leader Sir Albert Bore said: “We’re disappointed the total will be £2 billion rather than the £50 to £60 billion that Lord Heseltine had envisaged. We can be disappointed, but the last 12 months have opened the door to government and the issue is now is taking the agenda forward.”

In a similar vein, LEP chairman Andy Street said: “The £2 billion is a lot less than we’d hoped for, but at least it’s there. We have to take the opportunities of what’s there rather than complain what might have been.”

However, the Birmingham business community was more outspoken with Chamber of Commerce president Steve Brittan accusing the government of paying lip-service to the devolution of powers from Whitehall.

But, in fact, it wasn’t all bad news from the Treasury for LEPs. Investing in Britain’s future sets out some additional funding and powers:

• Bringing resources under the strategic influence of LEPs to at least £20 billion up to 2021.
• Making a further commitment of £5 billion of transport funding in the SLGF from 2016-17 to 2020-21 to enable long-term planning of priority infrastructure while also committing to maintain the SLGF at a total of at least £2 billion each year in the next Parliament.

• Giving LEPs responsibility for how €6.2 billion (£5.3 billion) of EU Structural and Investment Funds is spent.
• A fourth round of the Regional Growth Fund for 2015-16 and 2016-17, distributing £300 million.

The small print of Mr Osborne’s announcement makes it clear that LEPs will be expected to bid for cash from the Single Local Growth Fund from 2015 by identifying suitable skills, housing and transport projects. Funding will be allocated to every LEP through a competitive Local Growth Deal process.

On the downside, the Single Local Growth Fund mainly consists of existing government cash streams and is not ‘new money’. Most of the cash is for capital projects and cannot be switched to revenue. Some £314 million is already committed to transport projects for 2015-16, so not all of the funds are unringfenced.

The breakdown is as follows:

The government will issue guidance about precisely how the Single Local Growth Fund can be used and how Local Growth Deals will work in practice. LEP boards will look keenly to see whether promises of devolved budgets and powers have been delivered in practice.

And crucial to all of this will be the arrangements of political oversight of the more powerful LEPs. Will this be by supervisory boards, as GBSLEP wishes, or might the government take the opportunity to run once more with a West Midlands-wide strategic body, or even, whisper it, a metro mayor?

Not to be outdone by all of this, the Labour party’s own version of Lord Heseltine, Andrew Adonis, is to implement the Heseltine Review in  full should he ever get into government. He’s spoken of copying the example of Greater Manchester, bringing together councils into a powerful strategic body.

As to whether this could ever happen in the West Midlands, Adonis is careful to say that this must be a matter for the councils themselves to decide, which pretty much amounts to admitting that the feud-riven West Midlands will never become a Greater Manchester-type body.

Looking forward over the next year or so, of crucial importance will be the willingness of business leaders to continue to play the LEP game. How long, for example, will Andy Street continue to chair GBSLEP before concluding that he should pay more attention to his day job of running John Lewis?

Other LEP chairs and board members up and down the country will be looking anxiously to see if the government is serious this time about devolving budgets and decision-making powers to the regions. If, however, the iron fist of Whitehall continues to have the upper hand they may conclude that their time and energies are better spent elsewhere.