Local Enterprise Partnerships and the Regional Growth Fund


Written evidence submitted by Professor David Bailey and Gill Bentley in conjunction with the Regional Studies Association

1. Despite being handed a ‘toolkit’ by central government containing Enterprise Zones (EZs), easier planning, the chance to bid into the Regional Growth Fund and Growing Places Fund , the Localism Act and a general power of competence for local authorities, many commentators are still left wondering what real levers of economic growth the LEPs will have to pull. The situation in some cities where new ‘city deal s are now on offer may ( or may not ) turn out to be different or any better in enabling the LEPs .

2. Part of the rationale for LEPs is that local (or city) economies do not stop at local authority boundaries, requiring collaboration across a wider spatial area (see Hildreth and Bailey, 2012). Evidence from Europe is quoted in ‘Unlocking Growth in Cities’ that: "where the level of decision-making is a good fit with a city’s economic footprint this is associated with better economic performance" (BIS 2010, page 16). However, this logic has not been followed through in the bottom-up creation of LEPs. Some like Manchester make good economic sense. Others like Birmingham are considerably well under-bounded. Overall, many of the LEP areas are far too small for effective policy making; fragmentation has been too great. The National Planning Policy Framework (NPPF) (DCLG, 2011) does attempt to rectify this to some extent by including a ‘duty to cooperate’ among local authorities on planning issues that cross boundaries, but contains little or no guidance on what the duty means in practice nor clarifies what effective sanctions could be applied if they or the myriad of other organisations involved fail in this duty, and as such this can be seen as ‘ineffective’ (see House of Commons, 2011). At some point an intermediate scale will have to be back on the agenda to join up the work of the LEPs, which otherwise will be fragmented if not divisive. The proposal to give transport funds to groups of local authorities across LEPs makes sense as transport issues transcend LEP areas. However, given LEPs want the powers to be accorded to them instead, this in turn raises issues of democratic accountability. Here the lessons from RDAs, both positive and negative, will need to be remembered.

3. There is a question as to what happens to the LEPs that are not connected with a Core City (which may benefit by gaining new powers and revenue raising potential through the City Deals) (see Hildreth and Bailey, 2012). The ‘City Relationships’ study for the former Northern Way (Work Foundation, SURF and Centre for Cities (2010)) showed a complexity of economic linkages between towns and cities across Northern city regions. Many of the old industrial and port cities and towns like Burnley, Hull and Grimsby are relatively isolated in their commuting patterns and in their business networks. Their natural economies are too small, even within their designated LEPs and the consequences of their histories too great, to achieve much progress at such local levels. Indeed, expectations must be of continuing growing divides, even between places in the North and Midlands. This suggests the scale geographies of some LEPs is too small.

4. Points 2 and 3 above represent a major challenge towards the new framework. A major criticism of the RDAs was that that they were effectively imposed in a top-down and arbitrary way. As a result they were seen as bearing little relationship with functional economic geographies, and were not accountable to localities. RDAs had the ‘wrong geography’ it was argued. In contrast, the creation of LEPs has been very much a bottom-up driven process, and while potentially helpful in terms of closeness to the community and accountability, there is no guarantee that the configuration of LEPs that has emerged has the ‘right geography’ either. In fact, the new configuration of new LEPs may have just as severe problems over scale and boundaries as the old RDAs, albeit in a different form. A particular challenge is when interactions take place over different scales, how are stronger places going to be incentivised to cooperate with weaker places? That has yet to be made clear in government policy.

5. What does seem clear is that in the short-term the LEPs need a mix of real powers and so far few commentators feel that they have them, especially on the ability to raise finance (Bentley et al, 2010) . We heard more on such financing powers from the government in the Local Government Resource Review (DCLG, 2011 a ) . This did indicate that the government had been listening at least ; the review suggests that local authorities will be able to keep any growth in business rates, in the hope that this will create a stronger incentive effect to promote growth. But the review stopped short of making it absolutely clear that local authorities and LEPs have genuine finance raising powers (such as bond issuing powers) to get things done locally. Perhaps the proposed ‘ city deals’ now being unveiled (July 2012) may go further on this.

6. It is a critical point for many in business especially; real revenue raising powers for LEPs, fully using existing local authorities’ prudential borrowing powers – and more - are needed, especially given that the Regional Growth Fund has a substantially smaller pot of money available to support regional growth than that which previously went via the RDAs. But the clock is ticking: business in particular needs to see that LEPs have real powers with real resources, and there are real fears that unless this is made clear soon then businesses will start to walk away from what are essentially voluntaristic partnerships .

7. The possibilities for positive action have been illustrated in Manchester where one LEP covers the Greater Manchester area, where businesses are engaging with Local Authorities in a "creative tension" and where the LEP has a clear plan of where it wants to go through the research and intelligence gathered for the Manchester Economic Strategy. But Manchester has influence, benign political borders and local authorities willing to work together in way that reflects functional economic space. This long-run track record of partnership working and an agreed strategy meant that the LEP could ‘hit the ground running’. That clearly is no t the case everywhere, including in the West Midlands, wher e LEPs are much more fragmented and fail ed to match functional economic geography in any meaningful sense. There is a fear that w hat decentralisation is on offer will over time lead to widely different performances, depending on the strategic capabilities of local areas to manage their economic affairs , in large part related to past experience of doing so (Shutt et al, 2012) .

8. With the abolition of RDAs, some of the latter’s pow ers have gone back to Whitehall, including powers over inwar d investment, industrial policy , business support, innovation, and access to finance. Add in the confusion over responsibility for skills – which has been handed to the Skills Funding Agency and Colleges rather than LEPs, and the re is a sense of a "missed opportunity". ‘City D eals in some cities may help address the skills issues.

9. A key problem is that many of the rebalancing and restructuring issues the UK (and England therein) faces - for example in terms of developing green technologies - require a coordinated and holistic approach involving multiple layers of government (e.g. city, region, national level). Things need to be done at the lowest level they can be achieved efficiently. In some cases that is the local level (well being, schools, refuse, roads etc) in some cases regional (supporting region-wide clusters and innovation, intelligence gathering and accessing EU funds for example) and in some cases national (technology foresight, competition policy, fiscal and monetary policy etc). At some point an intermediate scale will have to be back on the agenda as noted above. In the meanwhile, greater efforts to decentralise more powers to the local level (rather recentralising to London) are needed, along with clearer fund-raising powers if the new LEPs are to have a real chance at promoting local economic development. While ‘City Deals’ may offer a useful first step for some cities , other localities will be left wanting.

10. On the RGF, we wish to stress that firstly the RGF is small, representing a considerable cut in funding for economic development as compared with what went through the RDAs. As a result a large number of worthwhile projects have been turned away. Secondly, the RGF it distributed in a top down, centrist way from London in contrast to the old RDA spending where decisions were made near the ground in the regions. In the future we would like to see the LEPs given a greater role in RGF decisions to ensure projects funded accord with local priorities. Thirdly, the RGF has been too slow in getting due diligence done on projects once approved, which means that the money has taken too long to get out into the real economy. Fourthly, the criteria for the award of RGF funding are less than clear and greater transparency would be helpful for bidders. Finally, we also point to the report by the National Audit Office (2012) which noted "value for money was not optimised because a significant proportion of the fund was allocated to projects that offered relatively few jobs for the public money invested". While we welcome the innovative approaches being taking by some LEPs on business finance, the issue needs attention to ensure businesses can obtain finance for investment towards economic recovery.

Authors’  Affiliations:

Professor David Bailey (Coventry University Business School, and Chair, Regional Studies Association)

Gill Bentley (Birmingham Business School)

5 July 2012


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Work Foundation, SURF and Centre for Cities City Relationships: economic linkages in Northern city regions (Northern Way, 2009). Available at: http://www.thenorthernway.co.uk/document.asp?id=766

Prepared 23rd July 2012