Same difference?

As councils up and down the country begin the process of setting up Local Enterprise Partnerships, Nicholas Dobson highlights the key differences with the Regional Development Agencies  that they are intended to replace and the issues they create for local authorities.

Sentence of death for Regional Development Agencies (RDAs) was confirmed in the Coalition Agreement of 20 May 2010. It was this that proclaimed the government’s support for the creation of Local Enterprise Partnerships (LEPs) to replace RDAs. And the journey to the legislative gallows for RDAs is set to start in the Autumn.

RDAs had become familiar beasts since their statutory birth in the Regional Development Agencies Act 1998. They were introduced to galvanise regional economic development and regeneration with aims including the promotion of business efficiency, investment, competitiveness and employment in their areas. There were undoubtedly many success stories surrounding the nine RDAs (see, for example, http://www.englandsrdas.com/case-studies). Equally, however, critics such as the Taxpayers’ Alliance (TPA) charged them with being an ‘expensive failure’ having poor accountability and being guilty of waste and duplication whilst absorbing public money with high executive pay and excessive expenses. Whatever the reality of the matter, the TPA recommended abolition and so it will now come to pass.

LEPs

But what are these things called LEPs? It seems that whilst LEPs will be flexible beasts whose exact nature and shape is still on the drawing board pending an imminent White Paper on ‘sub-national economic growth’, they will nevertheless have certain core ingredients.  Such was apparent from a letter from Business Secretary, Vince Cable and Communities and Local government Secretary, Eric Pickles, sent on 29 June 2010 to local authority and business leaders and copied to council chief executive offices.

For a start LEPs will be central to the government’s vision of rebalancing the economy towards the private sector. Consequently a ‘prominent business leader’ will usually be chairing the board (although the government would consider variants e.g. where the area has an elected mayor).  LEPs will be expected to ‘create the right environment for business and growth in their areas’. This is to be done by ‘tackling issues such as planning and housing, local transport and infrastructure priorities, employment and enterprise and the transition to the low carbon economy’.

The government also highlights the importance for LEPs of supporting small business start-ups as well as working closely with universities and further education colleges. In addition, the government considers it ‘vital’ that business and civic leaders work together.  In the view of ministers, this will normally mean equal board representation. As to governance, the structures ‘will need to be sufficiently robust and clear to ensure proper accountability for delivery by partnerships’.

So what does the government have in mind in terms of the type of geographical area to be covered by LEPs? Given its concern that some local and regional boundaries do not reflect ‘functional economic areas’, the government wants to enable LEPs to reflect more effectively the ‘natural economic geography’ of their areas ‘and hence to cover real functional economic and travel to work areas’.  The government is therefore seeking by no later that 6 September 2010 ‘outline proposals from partnerships of local authorities and businesses, reflecting the Coalition government’s agenda’. Ministers’ said in their letter that the government will welcome proposals reflecting the needs of every part of England and not least those that are ‘economically more vulnerable’ and it is keen to ‘work closely with and through’ capable LEPs meeting these criteria.

Life post LEP letter

So the government has effectively said here’s a broad brief for what we want, go away, come up with some proposals and we’ll then issue a White Paper firming things up a bit. So what’s been going on since the 29 June letter?
Authorities in Greater Manchester (whilst initially supporting the North West Regional Development Agency) have now apparently come down firmly in favour of a LEP to focus on improving skills and employment levels, increasing business growth and managing transition to a low carbon economy. It seems the Board is proposed to contain a cross-party group of leaders of the Association of Greater Manchester Authorities plus representatives from the Business Leadership Council and the Greater Manchester Chamber of Commerce.  And in July 2010 Leeds City Region (which it describes as ‘the real economy for 11 local authorities across North, South and West Yorkshire’ i.e. ‘the area across which people travel to work, spend their leisure time, go to school, and live’) announced its intention of forming a LEP, drawing on the existing Leeds City Region partnership arrangements but providing for greater collaboration with business. Other nascent LEP activity is also busy bubbling across the country.

On 28 July 2010 Mark Prisk (Regional and local economic development minister) and Greg Clark (Minister for Decentralisation) hosted a round table event with representatives of business, local authorities and think tanks to gather views on the creation of LEPs. Mr. Prisk afterwards described the meeting as 'positive', enabling business and council leaders to 'engage in a helpful conversation about forming effective partnerships that can provide real strategic leadership and drive local economic growth'.  And on 23 July 2010 the Communities and Local government Department announced that 'Business backs local enterprise partnerships'. On LEPs, Eric Pickles said that the government wants urgently to ‘rebuild and rebalance local economies without strangling businesses with red tape so that new economic opportunities spread across the country.

Regional Growth Fund

On the same day the government issued a consultation on the Regional Growth Fund (RGF). This £1billion fund had been launched by Nick Clegg on 29 June 2010 to support projects offering ‘significant potential for sustainable economic growth’ and which can ‘create new private sector employment’.  This is the first of two main objectives of the RGF. The second is to give particular support to those areas and communities currently dependent on the public sector to make the transition to ‘sustainable private sector led growth and prosperity’. A proportion of the fund will be allocated on a bid basis and Lord Heseltine is to chair the RGF’s Independent Approval Panel (IAP).

Bid proposals will need to show (amongst other things) that they are creating additional private sector jobs and that they fit within the economic priorities of the area as a whole. Other criteria include the need for projects to demonstrate private sector financial backing and leverage, how they will contribute to green economic growth, that they are State Aid compliant and that they properly address risk and the current ‘clear market failure’ in the area. Projects will also need to be ‘transformational in nature’. This means that whilst smaller bids will be considered, they will usually be expected to be for amounts of £1m or more.

The government expects that LEPs will play an important role in bringing together bids for their areas, working with key partners.  Proposals backed by LEPs will consequently ‘be looked upon favourably, particularly where they are put forward as a holistic package on behalf of the area and demonstrate that they have the support of the local community’. Nevertheless, the RGF will not be restricted to LEPs. Private sector companies and other public-private partnerships will be invited to bid for the fund independently by submitting a proposal directly to the IAP.

The government also indicates, however, that elements of the RGF could be allocated to LEPs on a grant basis potentially through a funding formula that enables them to support priorities they identify. These, say the government, could be complemented by elements supporting capital investment through loans and investment as well as bids. But there is currently some confusion as to just how the operation of LEPs is to be funded. Originally the government announced that they would have to meet their own day-to-day running costs. However, this stipulation was subsequently withdrawn since budgetary pronouncements are apparently off-limits pending October’s Comprehensive Spending Review.

Some key issues

The policy and funding backdrop should become somewhat clearer on publication of the forthcoming White Paper. However, in the spirit of its ‘localism’ agenda, the government is likely to want locally grown solutions that make a real difference in line with its broad policy aim of rebalancing the economy towards the private sector. Key issues for LEPs are likely to include:

• Choosing a ‘functional economic area’ with effective identity and synergy for the purpose. Tensions on this are apparently emerging in some areas with, for instance, Regeneration and Renewal reporting on 10 August 2010 that Hull City and East Riding Councils are in favour of forming a LEP ‘putting them on collision course with town halls south of the Humber estuary that say they would like to form a pan-Humber body’;
• Selecting an appropriate vehicle and structuring its constitution appropriately for present purposes given the policy refocus from public to private. Getting the members’ or shareholders’ agreement is likely to be important here;
• Getting effective governance and accountability arrangements properly in place bearing in mind the nature and functions of the LEP, the interests of those whom it has been set up to serve and the integrity of arrangements for managing public and other monies and securing best value in the application of resources. Clearly these will need to be integral to the constitution documents of the LEP. However, the Partnership Behaviour Protocol issued by Standards for England in August 2010 is also likely to provide a useful basis for charting the operational context.
• Ascertaining funding arrangements for set-up and ongoing operation.
• Reconciling the interests of the different stakeholders involved and in particular giving small business and start-ups effective representation and support;
• Dealing with realignment of culture to a more private sector focus;
• Putting in place effective strategies to make a real and positive difference in their areas by way of increased capacity and growth in private sector employment.

When they are up and running, LEPs will therefore need dynamically to drive their key functions. To do this they are likely to need legal and other support in the key functional areas of planning and housing, transport and infrastructure as well as employment and enterprise and migration to low carbon economy solutions.  LEPs are also likely to need expert legal and other support in framing effective funding bids to the RGFand in galvanising small business start-ups.

Local government

Local authorities have showed themselves adept over the years in adapting adroitly to a hailstorm of different policies that have changed with the political weather. These have usually been brought in breathlessly at breakneck speed by Secretaries of State anxious to add their signatures to the Tablet of Time. So from Compulsory Competitive Tendering, to Best Value, to Comprehensive Performance Assessment, through Comprehensive Area Assessment to Total Place and Place-Based Budgeting – authorities have constantly managed to keep their heads and keep on making things happen. They will certainly continue to do so with LEPs and while most are now turning their minds positively to it, some are racing forward as field leaders.

The LEP submissions made following the 29 June letter will certainly help the government shape the LEP policy infrastructure in a way that is effectively wired-up to the practical requirements of both business and local government. And both sectors (with their diverse constituencies) will need to ensure they forge effective working relationships to create the added economic value the nation sorely needs following recent financial meltdown.  Most are likely enthusiastically to do so. As Alan Goodrum, Chief Executive of Children DC said in his MJ article of 5 August 2010 ‘I know from contacts both locally in the Thames Valley and nationally that the government should be heartened by the enthusiasm of the response’. Whatever, policy tensions may be simmering within the Coalition, ministers are indeed likely to find that encouraging.

Dr. Nicholas Dobson is a Senior Consultant with Pannone LLP specialising in local and public law and is also Communications Officer for the Association of Council Secretaries and Solicitors.

© Nicholas Dobson, August 2010.