Goodbye RDAs, hello LEPs

The coalition government has announced its intention to abolish regional development agencies and replace them with local enterprise partnerships. Whether the change of approach will be successful remains to be seen, writes Steven Smith, adding that an effective land use planning system is key.

On 29 June this year Vince Cable and Eric Pickles wrote to local authority leaders and chief executives, as well as local business leaders, setting out their proposals to abolish all nine of the Regional Development Agencies and explaining their ideas for Local Enterprise Partnerships.

Their letter invited local authorities to work with the coalition government to help strengthen local economies, and confirmed the government’s commitment to reforming sub-national economic development by enabling councils and businesses to replace the existing Regional Development Agencies.

A White Paper later in the summer will set out the government’s approach to sub-national growth. Legislation to abolish RDAs and enable local enterprise partnerships was announced in the Queen’s Speech and is expected to be introduced to Parliament during the autumn. In the meantime the government, through the consultation, is seeking outline proposals by 6 September from partnerships of local authorities and businesses, to form Local Enterprise Partnerships.

Vince Cable, the Business Secretary, said: "We are determined to rebalance the economy towards the private sector, so it's important we create a more effective structure to drive economic growth and development across the country. We want a structure that reflects the genuine interests and commitment of enterprise, local councils and other stakeholders like universities and colleges. Local enterprise partnerships will provide that vision and then take on the task of renewing local economies and tackling local barriers to growth. We are asking them to tell us about their vision and I'm looking forward to what they've got to say."

After reviewing all the functions of the RDAs, the coalition government believe some of these would be best led nationally, such as inward investment, sector leadership, responsibility for business support, innovation, and access to finance such as venture capital funds.  Regional Strategies have been scrapped with effect from 6 July this year.

The government anticipates that Local Enterprise Partnerships will wish to provide the strategic leadership in their areas to set out local economic priorities. A clear vision is vital for local economic renewal to be achieved. The government is determined to rebalance the economy towards the private sector, and Local Enterprise Partnerships are central to this vision.

They will plan to create the right environment for business and growth in their areas, by tackling issues such as planning and housing, local transport and infrastructure priorities, employment and enterprise and the transition to the low carbon economy. Supporting small business start-ups will be important, as will working closely with universities and further education colleges, in view of their importance to local economies, and with other relevant stakeholders.

Some local and regional boundaries are thought not to reflect functional economic areas. Partnerships should reflect the natural economic geography of the areas they serve and cover real functional economic and travel to work areas. Where it is clearly the wish of business and civic leaders, existing regional boundaries may be used but proposals should reflect the needs of every part of England, not least areas that are economically more vulnerable.

To be effective partnerships, it is vital that business and civic leaders work together. This would normally mean an equal representation on the boards of these partnerships with a prominent business leader chairing the board. Where there is an elected mayor responsible for the area and if it is the clear wish of business and council leaders in the partnership area, the elected mayor could undertake that role. The governance structures will need to be sufficiently robust and clear to ensure proper accountability for delivery by partnerships. To be sufficiently strategic, partnerships should include groups of upper tier authorities.

To complement these proposals, Deputy Prime Minister, Nick Clegg has also launched a £1bn Regional Growth Fund to help areas and communities at risk of being particularly affected by public spending cuts.

The fund, which will operate in 2011/2012 and 2012/2013, will provide support to areas most dependent on public sector employment as the country makes the transition to private sector-led growth and prosperity. Both private bodies and public-private partnerships will be able to bid for funding by demonstrating that their proposal will bring in private investment and support sustainable increases in private sector jobs and growth in their area.

Nick Clegg said: "While we sort out the nation's finances we can also help to foster a thriving and more balanced economy so that no region or community gets left behind. The Regional Growth Fund will create the conditions for growth and enterprise in the regions by stimulating investment and create sustainable private sector jobs."

Eric Pickles, the Communities Secretary said: "If you want to rebuild a fragile national economy, you don't strangle business with red tape and let bloated regional quangos make all the decisions. Urgent action is needed to rebuild and rebalance local economies so that new businesses and economic opportunities spread across the country. The solution needs to be local – we know that when councils and local business work hand in hand they can drive economic growth together and places can be transformed. Local Enterprise Partnerships are central to this vision which is why we are asking them what they need. By giving up central control we will put democratic accountability back into the local economy making it responsive to the needs of local business and local people."

Further details of the Regional Growth Fund, and the creation of LEPs, will be set out in the forthcoming White Paper on local and regional growth.

It is proposed that separate arrangements will apply in London, where discussions are currently underway with the Mayor of London on how to further decentralise powers, particularly in the context of the abolition of the Government Office for London.

The abolition of RDAs will prompt mixed feelings. Whilst appreciating the emphasis on localism it will achieve, the loss of funding and capacity will be real. The proposal to take to the centre “inward investment, sector leadership, responsibility for business support, innovation, and access to finance, such as venture capital funds” may be perceived as contradicting to some extent, the theme of localism.

More importantly, the need to have in place an effective land use planning system is paramount. LEPs are intended to reflect the localism agenda. The aim is that the changes to the planning system should give local authorities and LEPs freedom from regional and central influences. LEPs will need to work closely with local planning authorities to achieve a Local Development Framework which assists the economy by creating the right environment for business and growth without compromising planning policies.

The degree to which central and regional guidance and influence should continue to play a role in local development needs to be clarified. In particular, a key question is whether the removal of housing targets creates a danger that housing delivery may be frustrated at a time when it is needed most.

The government is keen to ensure a smooth transition to the new arrangement. Time is short. Some councils are already actively considering their response. The challenge is very much a local one, inviting councils to work together and with other stakeholders to ensure that rigorous proposals, in tune with local needs, are presented to government.

It will be interesting to see what groupings emerge, and the extent to which they fragment the present regional groupings. Meanwhile the Regional Development Agencies have unfinished business, as well as the welfare of their employees and the businesses and communities they serve, to consider.

Steven Smith is a partner at Eversheds. He can be contacted on 020 7919 4500 or via This email address is being protected from spambots. You need JavaScript enabled to view it..