Economic Prosperity Boards - the missing link?

Rob Hann looks at the advantages of the lesser-known Economic Prosperity Board model for authorities unwilling or unable to embrace large-scale devolution.

The local government environment has become much more complex since the enactment of legislation permitting the establishment of new mega-corporations which span traditional local authority boundaries.

The options now range from all singing and dancing ‘devo-max’ Mayoral Combined Authorities which includes the so called ‘Northern Powerhouse’, to bodies slightly further down the ‘power’ chain - known simply as Combined Authorities (which don’t have an elected mayor but do have transport powers and other functions and the ability to precept and borrow for transport purposes). Finally, there is another, as yet largely unexplored option on the statute books - namely Economic Prosperity Boards (‘EPB’s).

Combined authorities with elected mayors have stolen all the limelight being the only means by which central government will consider devolving certain powers and budgets in accordance with “devolution deals”. Some regions have bowed to central government pressure to have an elected mayor as a quid pro quo to securing certain new desired powers. Others have not, but have managed to agree a broader range of functions than the original legislation envisaged (i.e. wider powers than economic development, regeneration and transport).

However, there is no legislative requirement that there be a devolution agreement between central and local government before a combined authority or an EPB can be proposed by two or more local authorities in a region. A group of councils can seek to establish a combined authority or an EPB without any reference to devolution. Accordingly, such bodies can be established with a clear focus on regenerating the local economy rather than seeking to secure a wide range of other functions without first delivering anything tangible under the new arrangements. This indeed was the original idea of such bodies. This article seeks to explore the benefits of a ‘back-to-basics’ approach to the establishment of combined authorities and EPBs where it makes sense to have a single public body established for a core functional purpose.

Agenda setting

Combined authorities are likely to have a much wider agenda even without devolution aspirations as their responsibilities also include transport functions and potentially could be much wider now that powers for CAs have been extended to include virtually anything central government decides. The natural direction of travel is for combined authorities to claim more and more powers and to broaden out, rather than narrow down, areas of responsibility.

The danger is that these new bodies become stretched in too many diverse directions trying to take on too many huge issues, failing to focus down on specific projects or programmes that might actually deliver growth, jobs and prosperity.

On the other hand, a combined authority or an EPB which is set up with some clear set purpose such as delivering a major infrastructure project across boundaries in a region – would help to prove such a body could actually deliver some tangible benefits.

With regard to EPBs - to date these bodies have been largely been discounted being regarded perhaps as the ‘poor relation’ of combined authorities since an EPB is simply a Combined Authority but without transport functions.

However, EPBs were originally supposed to be established to focus primarily on economic development and regeneration. This concentration upon a specific growth agenda may in fact be a hugely positive feature as it provides EPBs with a much clearer focus. It could also be a major advantage over individual constituent member authorities who, over the years, have had to target ever scarcer resources on social provision.

These social functions are vital – from safeguarding vulnerable children and adult social care, to trading standards, social housing and waste management – and all are underpinned by legal duties. However, there is no specific and express legal duty on local authorities to promote economic development.

For most local authorities, if economic development has occurred it is often secondary or incidental to other multifarious social functions. The consequences can be that insufficient attention is given to local economic development and regeneration initiatives within individual authorities and across local authority regions. The establishment of a single purpose combined authority or an EPB could be really beneficial.

Lessons from the past

Setting up special purpose corporate bodies to perform regeneration functions is not, of course, a new idea. In the 1980s, in an effort to reverse the process of inner city decline, the then UK government set up Urban Development Corporations (‘UDCs’) to regenerate inner city areas which had large amounts of derelict and unused land by taking over planning responsibility from local councils. A total of 13 UDCs were established in England. The lifetime of projects varied from five years (Plymouth) to 17 years (London Docklands).

UDCs had the power to acquire and reclaim land, convert old buildings and improve infrastructure through the investment of government money. UDCs also attracted private sector investment through offering reduced taxes and other benefits and in doing so they promoted industrial, residential and community developments along with local employment opportunities. The UDCs have been seen as largely successful ventures. There are other examples such as the City Challenge partnerships of the 1980’s and 1990’s.

Slow progress

If setting up such bodies is a good idea, then why have no EPBs been created to date? One reason is that the process for establishing an EPB is virtually identical to the process for establishing a combined authority. Transport too is a key aspect of many regeneration aspirations.

Why (so the argument goes) would any group of authorities go to the bother of setting up a new vehicle and navigating identical processes, to end up with something that could be regarded as a half-way-house to a ‘full blown’ combined authority?

Well, one answer might be that, particularly in two-tier areas, there could indeed be a real and pressing need for several diverse authorities to combine effort and resources through a single public sector entity in which they all have a stake and which is 100% focused on promoting the economy of that region for the benefit of all.

To date, (if we discount Mayoral Combined Authorities which are mainly metropolitan regions) no such body exists and as Britain leaves the European Union, it will become ever more crucial for regions to have a strong local voice and to be able to make crucial decisions in a more efficient way than might currently be the case.

There are some areas which have actively explored EPBs. Cheshire and Warrington seem to be the furthest towards the establishment of a formal EPB but no Order has been made to date under the relevant processes (i.e. it does not seem to have been approved by government). Several clusters of authorities also seem to be actively exploring EPBs as potential vehicles for economic development, regeneration and as a practical governance vehicle for regional collaboration by and between like-minded local authorities interested in promoting growth in their respective areas.

Another driver for EPBs (or more simple combined authorities) is the fact that the current collection of possible vehicles through which local authorities might join up to pursue major infrastructure projects which cross boundaries, are limited and arguably not fit for purpose.

The establishment of an EPB as such a vehicle would provide a clear remit through a special purpose vehicle which exists entirely within the public sector able to contract with third parties and to carry a mandate for each and every one of its local authority members. This would be a clear signal to developers and funders that the EPB region which the EPB serves, is open for, and means, business.

EPBs and combined authorities are ‘bodies corporate’ with a separate legal identity from their constituent member local authorities (unlike joint committees). This means two or more authorities working through an EPB or a combined authority which they are sole members of will be able to undertake their own administrative processes, for example hold budgets, employ staff and enter into contracts for and on behalf of the EPB/CA. Whilst an EPB/CA is a corporation, it is not a company governed by company law. Rather, it is a separate public body entirely within the public sector. This is important, not least for tax, VAT and SDLT purposes.

There are many advantages from a fiscal perspective of setting up a body which remains entirely within the confines of local government and is not (for example) a company, e.g. no corporation tax, inter-group VAT and SDLT implications.

Geographical restrictions

The relevant primary legislation for establishing both EPBs (and combined authorities) is contained in the Local Democracy, Economic Development and Construction Act 2009 (‘2009 Act’) and the Cities and Local Government Devolution Act 2016 (‘2016 Act’).

Originally the 2009 Act imposed certain geographical conditions on who could or could not become a member of an EPB. However, Section 11 of the 2016 Act removes these geographical conditions which formerly prevented EPB authority areas from being non-contiguous or doughnut-shaped.

However, in deciding whether to establish EPBs for areas where part of the area is geographically separated from the rest of the EPB, the Secretary of State must have regard to the impact on economic development in neighbouring local authority areas.

Economic prosperity boards could become an important option open to groups of authorities who are exploring land pooling programmes to generate surpluses for re-investment purposes or where they are looking for a vehicle to promote a specific major infrastructure project or programme which crosses boundaries of each member.

Some authorities (sensibly) are testing the waters by working through the more tried and tested method of joint committees but these arrangements have their drawbacks.

Establishing a specific legal entity that engages the leading members of the community in crucial economic development, regeneration, job creation and growth initiatives impacting across a wide geographical area must be an attractive option to many councils to combat deprivation and re-invigorate local economies.

How are they set up?

Under the original procedure from the 2009 Act, a local authority or authorities may carry out a ‘governance review’, which must publish a ‘scheme’ recommending the creation of a combined authority or EPB. Publication of the scheme requires the consent of the local authority areas included in the scheme.

The Secretary of State may then agree to create a combined authority or EPB, by Order under the 2009 Act.

Alternatively, via the 2016 Act, the Secretary of State may decide to establish a combined authority or EPB, if the councils in the relevant area consent. The Secretary of State must hold a public consultation, unless one has already been carried out locally and a ‘scheme’ has been published. The Secretary of State must be satisfied that the establishment of a combined authority or EPB is likely to “improve the exercise of statutory functions” in the area in question.

Conclusion

EPBs (and highly focused combined authorities bodies), provide exciting new opportunities for the joining up of economic regeneration across regions through a legal entity wholly within the public sector administrative environment. Through such bodies, constituent councils would have greater flexibility and influence than each council working independently would have. The process to establish a combined authority and an economic prosperity board is identical and relatively straightforward, albeit there are public consultation and statutory approval processes necessary which may be a disincentive to some.

EPBs and (simple) combined authorities offer new potential options for public sector collaboration which could help groups of public bodies speak with one voice to progress major projects and programmes affecting their regions. Particularly, in two-tier areas EPBs could be the missing link which would really assist such important projects to get off the ground and to secure funding, governance and delivery skills needed.

Rob Hann is a legal consultant and author and the former director of legal services at Local Partnerships.

This article was first published in the July edition of Local Government Lawyer Insight, which can be accessed at http://www.localgovernmentlawyer.co.uk/insight Insight is published four times a year and is circulated free-of-charge to all Local Government Lawyer newsletter subscribers (click here to subscribe) in electronic format. A single hard copy is also circulated to all local authority legal departments in England and Wales. Additional printed copies are available for just £49.95 for four issues. Multiple copies are also available at £149.95 for five or £249.95 for 10. Payment can be made by purchase order/invoice or by credit/debit card. To order, please call 0207 239 4917 or email This email address is being protected from spambots. You need JavaScript enabled to view it..