LEPs: A swot's guide

Whichever side of the political fence you sit - or indeed if you just prefer to sit on it - it is difficult to deny that the coalition is a government in a hurry. This is certainly true when it comes to its plans for economic development. Although the RDAs have not quite gone the way of Anne Boleyn, as communities secretary Eric Pickles once promised, they are going, and more quickly than most expect.

As revealed in LGC, most RDAs will likely be replaced by new Local Enterprise Partnerships - council and business-led sub-regional consortia focused on driving economic growth - by September of next year, with some phased out before. Already some of the agencies are offering voluntary redundancies and preparing the transition to the new arrangements, which are rapidly coming into view (see table below).

Letter of Invitation

What then do we know of these Local Enterprise Partnerships? In a letter sent out last month to councils and businesses, business secretary Vince Cable and Mr Pickles said they expected the LEPs to cover “natural economic areas” and comprise groups of at least two upper tier councils.

However, in the weeks since the letter was sent, it has become clear that these two markers are not fixed, but rather should merely be taken as “guidance”. Indeed, LGC was told by a Treasury source that the stipulation on there being at least two upper tiers councils in a LEP was simply to ensure that ministers did not receive a host of bids from groups of districts.

Greg Clark, decentralisation minister, told LGC that if a single county council wants to make the case to have a LEP - as Worcestershire and many of the home counties plan to do -then they are welcome to do so. The mantra, of course, is localism, localism, localism, which means, in this case, ministers not telling local areas how to put together their LEPs, rather councils and their business partners coming to ministers and saying this is what we want to do.

But here things begin to get muddled, with the two sponsoring departments - and in Mr Pickles and Mr Cable, two of the coalition’s big beasts - singing from very different hymn sheets. On the one hand the Department for Communities and Local Government says there will be little or no ministerial intervention in the process of forming LEPs, with the partnerships not needing to be ‘signed off’ by government. While Mr Cable and the Department for Business, Innovation and Skills say the plans will be submitted to a process of review and ministerial approval with those that fail to meet the central requirement, that they cover a “natural economic area”, weeded out.

Whitehall Battles

In fact, the clearest statement to this effect came from Mr Prisk who, in a Westminster Hall debate, told MPs that LEPs would be “formal, legal entities” that “must be equal between business and civic leaders”. He added that the boundaries of the LEPs “must” relate to the “real economy of today”. He said: “Our objective is simple: to encourage strong local leadership and to promote economic growth, based on institutions that match the economic reality on the ground and that have the freedom, and therefore the diversity capability, to make a real impact.”

If the the ultimate formal shape of LEPs seems to be a point of conflict between Mr Cable and Mr Pickles then it is ought to be resolved in Mr Cable’s favour, as businesses are unlikely to be interested in engaging with LEPs that are “loose associations”, as DCLG has suggested. The view from business - and from Treasury for that matter - is that they want to know who they are dealing with and want the confidence that that ‘who’ won’t change when difficult decisions need to be made. The strongest and most successful LEPs, LGC has been told, will be those with the strongest partnerships arrangements in place, such as Greater Manchester’s combined authority proposal, rather than those founded on fine words and a handshake.

Mr Cable has also relaxed some of the other conditions set out in the initial letter of invitation. At first it seemed that the Department for Business, Innovation and Skills wanted to take back some of the RDAs best toys - inward investment, venture capital, leadership on growth sectors, and business support - but now Mr Cable has said that, again, if LEPs make a strong case for taking on some of these functions - as Greater Manchester, for example, plans to do in the case of inward investment - then they may be able to do that.

Inward investment?

This came is a relief in the north of England, where there is deep scepticism about the ability - or will - of UKTI to maximise the flow of inward investment into areas so distant from London. One of the most welcome functions of the northern RDAs was their focus on attracting investment into places like Hull, Middlesbrough and Liverpool as well as Newcastle, Leeds and Manchester. “How do they propose to rebalance the economy from [DBIS’s] office in Victoria Street,” more than one northerner complained to this reporter.

So the message is that councils must come up with their own LEP proposals - ministers aren’t going to tell them how to do it - and those proposals are to be submitted by 6 September. Be “radical” and “ambitious”, Mr Pickles has said, encouraging councils to tell ministers what they want.

That was also the message at a meeting between a delegation of local authority and business leaders from around the country and Mr Prisk and Mr Clark this week, LGC was told. Some key issues that raised at the meeting included whether regions could retain ‘some form’ of residual reigonal body - as the three northern regions want - to focus on high level strategic functions, such as inward investment, or major strategic transport projects. The response from ministers was, make the case, LGC was told, and we will listen.

Make the case

For now, what is clear is that government wants LEPs to take on responsibility for areas such as housing and planning, local transport and infrastructure priorities, employment and enterprise and the transition to the low carbon economy. Exactly what sort of powers this might involve, is of course, not yet clear - again it’s a matter of ‘make your case’.

But there are some responsibilities that some LEPs might like, such as commissioning for employment and skills, that may not be granted. The Department for Work & Pensions is already developing its new single Work Programme across regional lots, which will in the first instance be commissioned centrally. Will LEPs like Greater Manchester get any role in commissioning employment programmes for their area? Perhaps not. Meanwhile, DBIS is taking away councils responsibilities for 16-19 skills - another area of interest to city regions - as is adult skills, the organisation of which is set for another shake up.

At the meeting with Mr Prisk and Mr Clark last week, the concerns about centralisation of some functions that LEPs would like to bid for - inward investment, business support, employment and skills, for example -were voiced. The response? Make the case. That is the challenge thrown down to these nascent partnerships and the job will not be just to convince Mr Cable and Mr Pickles but DWP, DFT and Treasury too.

Show me the Money

Having made their case, will LEPs get any money? Yes, but not much. On the same day as they submit their LEP proposals councils will also be expected to have sent in their responses to the consultation on the Regional Growth Fund, launched this month.

The consultation said the fund, worth £1bn over 2011-12 and 2012-13, which is roughly 65% less than the RDA networks budget, would likely be divided into two pots: a challenge fund that will be subject to competitive bidding for capital investment grants or loans and another pot to be allocated to LEPs through a funding formula.

The consultation clearly stated that LEPs are expected to take the lead role in bidding for grants through the RGF, with all areas of England (except London) eligible to bid for capital grants of at least £1m, with the deadline for first round of funding at end of year.

But it also said that the cash will be focused on “areas and communities that are currently dependent on the public sector”, with bids expected to show not only how they will boost private sector growth but also support those working in the public sector who may face redundancy.

Lord Heseltine

According to the consultation, bids will also be expected to comprise a ‘package of projects’ brought together by LEPs that are: “transformational” in nature; focused on boosting private sector employment; able to demonstrate “significant private sector leverage”; address a “clear market failure”; backed by the community; and able to contribute to “green economic growth”.

Ultimately, the bids to win funding will be decided by former deputy prime minister Lord Heseltine, who along with Sir Ian Wrigglesworth, chairman of the Port of Tyne, will make recommendations to ministers on how the jam should be spread. In this, the consultation said Lord Heseltine would “aim for projects that are transformational in nature and avoid spreading the money thinly across the country”.

But Mr Prisk has also said that the LEPs would not have to rely solely on bids to the RGF, which he said would be an “entirely distinct element” from the LEPs. “The funding for one is not the funding for all,” he added. This raises the prospect of there being some other source of funding - perhaps the remainder of the RDA budget - available to fund the partnerships, but for those details we will have to wait for the white paper.

And as for what the LEPs will actually be able to *do*, well that will have to wait for the white paper too. Though if you believe ministers’ localism mantra, it’s just a matter of councils making the case, and the powers will come. We will see.