The new local growth landscape

Construction iStock 000002149516XSmall 146x219Anja Beriro looks at the state of play with local enterprise partnerships and the role of local authorities in driving economic growth.

Since the Treasury’s call for “unleashing the power of local economies” in March this year, in response to Lord Heseltine’s October 2012 report No Stone Unturned in Pursuit of Growth, it has become clear that the Government is starting to make good on its commitment to localism. Eric Pickles’ vision of power moving away from Whitehall continues, with some reticence from other central government departments.

Local Enterprise Partnerships (LEPs) are now coming out of their infancy and having been given a boost last autumn with the confirmation that core funding of up to £250,000 would be available to each LEP for the next two financial years, they are keen to move forwards. A number of city regions now have City Deals giving them additional powers and funding opportunities and this is set to increase with another 20 currently being negotiated. All this means that exciting times lie ahead for local authorities but only if they are willing to move outside their more traditional remit.

The Heseltine Report and the Treasury backed up the challenges laid down to LEPs in a report of September 2012 from the All Party Parliamentary Group Where Next for LEPs? These were to:

  • get the balance between strategy and delivery right;
  • pursue wider and deeper engagement with businesses;
  • explore more collaboration across LEP boundaries; and
  • ask local authorities to show more leadership, particularly in using LEPs to deliver cross-authority work.

The final two are most relevant to the way in which future funding will be allocated and how central government will evaluate the success of local growth initiatives. However, they cannot be achieved without the first two and it is really important that all the partners involved in local growth arrangements consider how these can be achieved.

Collaboration

As local authorities will already be aware, successful LEPs and City Deals require true partnership working between the public and the private sector within the geographical boundaries of those partnerships. In some cases, LEPs are showing the benefits of moving beyond those boundaries and working with other partnerships. This has been applauded by central government as a way to further improve the leverage of private finance with the help of public funding, therefore getting a bigger slice of the financial incentives being awarded by Whitehall.

The ability for local authorities to pool their retained business rates to again get more leverage from a bigger pot is now more of a reality. This could also happen with Tax Increment Financing (TIF) if it is part of a City Deal or other arrangement with the Treasury. For both of these, and particularly TIF, councils will have to consider the normal prudential borrowing requirements and, in the small number of deals where it can be outside the prudential borrowing limits, the local authority will still have to take reasoned and balanced decisions as to how it could use TIF to drive local growth.

These financial benefits will be looked at very closely by central government when assessing the ability of LEPs and other local growth partnerships to manage and drive forward growth. It is without doubt the role of the local authority to ensure that maximum benefit can come from this while retaining the control required to satisfy its auditors.

Leadership and governance

The Single Local Growth Fund is one of Lord Heseltine’s successes. The Heseltine Report strongly criticised the plethora of current funding streams for local growth and advocated a single pot in which up to £49 billion worth of funding would sit. The Treasury has taken a slightly more cautious approach and is initially talking about some funding for skills, housing and transport being in this single pot which will be in place from the financial year 15/16.

One of the most important differences between this new funding stream and the existing ones is the requirement for governance structures being set up and led by local authorities. Examples of these have already been seen in the North East with the setting up of a combined authority and in Birmingham and Solihull where a “supervisory board” comprised of elected members of the different authorities have been established. These will be seen as a key part of the Strategic Growth Plan, the basis on which negotiations for the new single pot will take place. Those areas that can evidence good and proportionate governance will be seen as a safer bet for larger sums of money. There will also be less ongoing involvement from Whitehall.

The Treasury also expects to see a lot of the projects funded through the single pot to be delivered by local authorities and other bodies not the LEP itself. Therefore, it is incumbent on local authorities to ensure that they have the procedures and strategies in place to give confidence to the other partners and central government that they can step up to the plate and take their place in the local growth agenda.

Conclusion

Despite the government’s apparent obsession with growth in the private sector there is no doubt local authorities will have an extremely important role to play in how this is achieved. As the Treasury have shown within the last month, funding needs to be managed and delivered upon within strong and transparent governance arrangements. The public sector has years of experience of making these work and shouldn’t be afraid to say so and show that it can be a driving force for local growth.

Anja Beriro is a specialist in public sector projects and procurements at law firm Browne Jacobson. She can be contacted by This email address is being protected from spambots. You need JavaScript enabled to view it..