Enterprise culture

In the 2013 Budget the Chancellor accepted the majority of Lord Heseltine’s recommendations in his review of economic growth, No Stone Unturned, and announced measures that will devolve significant funding to Local Enterprise Partnerships (LEPs) to enable them to encourage growth in the regions of England.

In the “Government’s Response to the Heseltine Review” the Government has ambitious plans for LEPs over the next two years which will also have a significant effect on the local authorities that work with the LEPs. 

Are the LEPs and the local authorities ready for it?

The points that come out of the “Government’s response to the Heseltine review” are far-reaching and some are buried in the detail. The main benefits that LEPs will be getting are:

• from April 2015, the Government is creating a Single Local Growth Fund which will be available to LEPs to generate growth. This will include funding for housing, transport and skills;
• the Government will streamline the management of the EU Structural and Investment Funds to align them with the plans of the LEPs. This includes the European Regional Development Fund, the European Social Fund, the European Maritime and Fisheries Fund and part of the European Agricultural Fund for Rural Development;
• the Government will assign to each LEP a senior Whitehall sponsor to support and challenge the LEP and create cross-departmental Local Growth Teams that these sponsors can use;
• the Government will provide an additional £250,000 per LEP to improve capacity within LEPs;
• from 1 November 2013 the Government is making available a new Public Works Loan Board Rate (PWLB) based loan to a local priority infrastructure project nominated by each LEP up to £1.5bn in total;
• LEPs will be responsible for setting local skills strategies. Further Education colleges will not get chartered status unless they have taken into account the skills priorities of the local LEPs. LEPs will be encouraged to be on the governing bodies of FE Colleges and FE colleges represented on LEP boards;
• the Government has asked Sir Andrew Witty, CEO of Glaxo Smith Kline and Chancellor of Nottingham University to explore how universities can support LEPs to drive growth; and
• the Government will look at options for aligning employment support programmes with LEPs and the Single Local Growth Fund.

However, to get these benefits the following must happen:

• LEPs are encouraged to collaborate with other LEPs and where necessary amend their boundaries;
• the LEPs have to develop strategic multi-year plans for local growth, consistent with national priorities. The amount of funding the LEPs receive will depend on the quality of the strategic proposals put forward by the LEPS and so there will be competitive tension;
• the local authorities will be expected to pool resources and functions and work across the LEP area;
• LEPs will be required to work with local authorities to simplify the planning process;
• local authorities and LEPs will need to demonstrate that they have governance and accountability structures in place that are robust, proportionate and transparent. If they don’t demonstrate this then there will be more central control for that LEP.

The LEPs and local authorities will welcome the news that the Government wants to give them more powers to encourage local economic growth but the Government is using this devolution of funding as an opportunity to encourage local authorities to restructure with their preference for authorities across LEP areas to become combined authorities.

The Government is clear that it wants LEPs to remain private sector led and streamlined but it recognises that there needs to be clear accountability for the spending of the funds to enable them to have the assurance that taxpayers’ money is being spent well. Therefore, it is requiring the local authority members of the relevant LEP to ensure that there are adequate controls and procedures in place. The Government is expecting the local authority members to be the holder of the purse strings and the body that will deliver or commission the decisions of the LEP. The local authority members will have to have the right amount of resource to support the LEP’s activities but this comes at a time when local authorities are having to make more cuts to their budgets.

LEPs and their local authority members will need to ensure they are prepared to take on this challenge that the Government is setting for them. There is an obvious danger that this process of devolution of funding powers will take some time to complete and so delay any economic recovery in the regions. If the growth is too slow local politicians will not want the finger being pointed at them.

Some of the issues that they need to grapple with are:

Clear responsibilities

The local authority members, particularly the accountable body, should have service level agreements in place that make it clear what each party’s role is and what their responsibilities are.

State aid law advice

The allocation of funding by the LEPs will need to be compliant with European State Aid law provisions set out in the General Block Exemption Regulation and its future replacement as well as Treasury Green Book guidance. 

Governance and accountability structure

The Government has put a lot of emphasis on LEPs having a robust, transparent and proportionate governance and accountability structure. LEPs and their local authority members should consider the various options, including the use of a Supervisory Board of the local authority members that has been chosen by the Greater Birmingham and Solihull LEP. They will need to have policies in place to deal with issues such as conflict of interests, particularly as the private sector members may have indirect commercial interests in certain projects being funded.

Shared services

Local authorities will need to consider to what extent they will share services. This can vary from having a combined authority, a partnership to sharing various functions.

Resourcing, confidentiality, freedom of information, data protection and Equality Act

The LEP will have to have investment committees that have sufficient expertise and experience to analyse the diverse bids for funding but have policies in place for those committees that deal adequately with issues around data protection, confidentiality, freedom of information and the Equality Act

Conclusion

The Government’s plans to devolve the funding of regional economic growth to LEPs and with it the chance to play a large part in the recovery of the British economy are far reaching and it is a huge responsibility for a body that is not accountable to the tax payer for the decisions it makes. The Government recognises that and so it is requiring the LEPs and their local authority members to change the way they work with each other to being more collaborative and put in structures and policies that safeguard public money as much as possible.

These changes will not be easy to put in place when there will be parties with different interests. To maximise their chances of receiving the funds, the LEPs and their local authority members will need to act quickly to make the changes the Government requires and put in the right structures and policies.

Jon Coane is a partner at Bevan Brittan. He can be contacted on 0870 194 5021 or by This email address is being protected from spambots. You need JavaScript enabled to view it..