Adonis Must Learn the Lessons on LEPs

LEPs are a great innovation and are already helping local communities build on their strengths to deliver growth, but they must have the right resources and structures in place to enable them to reach their full potential.

Lord Adonis will soon be packing his bags for a fact-finding journey across Britain to learn about the unique challenges to economic growth faced by different regions. This is all part of his new role as leader of an independent review on growth, launched by Ed Miliband on Thursday, which promises to set out a "radical agenda for change to revitalise the British economy" by spring 2014. Let's hope he also pays close attention to the lessons learned on local enterprise partnerships (LEPs) during the 2013 Spending Round.

LEPs are partnerships between local authorities and local businesses designed to set out local economic priorities at smaller sub-regional levels. They replaced the nine Regional Development Agencies (RDAs) which the Coalition Government had labelled as wasteful, ineffective top-down impositions on local areas. Unlike the RDAs, members of LEPs are not appointed by the Government, but are brought forward by local authorities, and the geographic areas they serve are much smaller and more refined. The idea was to "put democratic accountability back into the local economy by making it responsive to the needs of local business and local people" and thereby create a new economic model by which to drive regional growth.

They are already showing much promise in channelling investment into local business schemes. On Thursday, a number of programmes run by LEPs won funding in the highly competitive fourth bidding round for the £506m Regional Growth Fund (RGF), and earlier this week, Vince Cable announced £2.4 million in RGF funding for 14 companies through the Humber Local Enterprise Partnership.

But the Government may be clipping the wings of its own initiative. LEPs must bid for central Government funding from a single pot, the Single Local Growth Fund (SLGF). This was recommended by Lord Heseltine in his report No Stone Left Unturned: In Pursuit of Growth, published in March this year, and announced by the Chancellor in his 2013 Spending Round speech. Lord Heseltine recommended funding this pot with between £49-70 billion over a four year period. The Government, however, budgeted a much smaller initial sum of £2 billion during 2015-16. The fund will then be increased by an additional £2 billion each year for the rest of the decade, so that by 2020, at least £20 billion will be under the control of LEPs. Speaking about this at the CIPFA annual conference last Wednesday, Lord Heseltine was optimistic, calling the funding a "significant start".

However, the announcement came to the disappointment of many LEPs. The chairman of the Greater Birmingham & Solihull LEP said the announced funding amount "could be viewed as a disappointing outcome", and according to the Chair of the Thames Valley LEP, "There has to be capacity and ability to do things, otherwise your private sector people will start to say, what's the point?"

From Whitehall's perspective, the point appears to be safeguarding departmental budgets. The Chancellor's 2013 Budget outlined that funding for the Single Local Growth Fund would come not from a single department, but would be funnelled from the Department for Culture, Media & Sport, the Department for Business, Innovation and Skills, and also the Department for Transport.

In the run up to the Spending Round, ministers were reluctant to provide funding from their departmental budgets as they fought to protect their departments from cuts. Business Secretary Vince Cable reportedly was adamant that he should not have to present to the Star Chamber to defend his department's funding and fought hard against the Treasury team to protect his budget. Likewise, Maria Miller struggled against the Treasury to defend the Department for Culture, Media and Sport from having its budget cut by 10 per cent.

This reluctance to contribute funds points to the larger problem of ministerial ownership. Many LEPs are unclear where responsibility for their work lies in central government, which is partly due to the split ownership of the project. This problem was addressed by the Business, Innovation & Skills Select Committee's latest report on LEPs, which called for a single minister with responsibility and accountability for LEPs to be based in the BIS Department along with all LEP contact officers.

If this hub and spoke proposal were adopted, it might create better clarity between LEPs and Whitehall, and potentially generate more enthusiasm to contribute to the SLGF. However, there remains the issue of long-term certainty. LEPs can now be assured that they will have a pot of £2bn to bid from in 2015-16, but what comes after is less certain. Though credible spending plans have been laid out to provide £20bn for LEPs by 2020, only the initial £2bn of core funding is secure, given that there will be a General Election in 2015.

There are signs that Labour is thinking on some of these issues. Speaking at the CIPFA annual conference, Shadow Business Secretary Chuka Ummuna said, "We welcomed Lord Heseltine's review, and wished the Government had gone further, matching their rhetoric with action...we will seek to build on Local Enterprise Partnerships. Tweaking and strengthening where necessary. Matching the capacity to play a greater leadership role with clearer accountability."

LEPs are a great innovation and are already helping local communities build on their strengths to deliver growth, but they must have the right resources and structures in place to enable them to reach their full potential. To set out its "radical agenda for change to revitalise the British economy", the Adonis Review needs to seek solutions on how to ensure sufficient long-term central government funding for LEPs, how to create ministerial ownership for the project and decide which department should claim full responsibility for them. Eric Pickles used to say of the old RDAs that "they will go the way of Anne Boleyn". Let's not let LEPs go the way of Henry VIII's first wife: ignored and cast aside.

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