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A focus on leverage and governance

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At the recent LGA annual conference, economic development was a frequent avenue of discussion.

Key topics ranged from how to fully back your LEP to how to grasp the opportunities of recent government announcements, such as the single local growth fund.  In fact most of the workshops and plenary sessions whatever the subject, touched on that all-important single issue of the economy.

However, there was a notable and sometimes tense atmosphere surrounding the reaction of district councils to the inclusion of the top-slice of New Homes Bonus within the single local growth fund. Understandably, the consequences of this for many will now require a satisfactory resolution at the local level to avoid disengagement. I think we can all see the motive of central government but a hospital pass to the local partnerships none the less, and at a time when many two-tier LEP areas are developing new structures of local economic governance.

Lord Heseltine reminded us in his speech of his key messages to central departments, local government and business. The following day he visited us in Leicester and Leicestershire to see the progress of our five new development sites, specifically our first Enterprise Zone. Consistent with his speech at the LGA conference the conversation centred on the importance of leveraged private sector investment as a key determinant of success, not just the value of government funding in the single pot.

The success so far in these terms of the Regional Growth Fund in Leicester and Leicestershire is measured as having delivered a 3:1 leverage of private to public funds. The Growing Places Fund has so far delivered 5:1 and up to 10:1 in some cases.  Our Enterprise Zone has progressed beyond its fourth investor, with a fifth to be announced within weeks, having created over 250 jobs already and is on plan to deliver a leverage of 10:1.

If every discussion on the local economy right now can be boiled down to just two points, then one is clearly the focus on establishing the right structures and goals for effective public sector collaboration. The other is the need to engage the private sector in a way never done before to leverage significant private sector investment. The game plan is clear.

As twenty more LEP areas contemplate how they develop and strengthen their city deal proposals, the challenges of structure and governance return to centre stage for debate.  Combined Authorities and Economic Prosperity Boards will no doubt feature on many LEP board agendas. 

The first element of the debate could well centre on the optimism of what value, flexibilities and investment such strength of local governance could bring if Whitehall is sufficiently assured. It is impossible today to know what a city deal is worth to an area, but my estimate is that it could be worth an extra £50m per year to Leicester and Leicestershire in monetary terms alone. 

The second element could well be the fear and uncertainty of what limited levels of local economic control of funding and investment would be available in the future without a convincing structure of governance and decision making.  Smaller city and county regions without such governance may feel increasingly out of touch and disadvantaged. Combined Authorities and EPBs will not be appropriate for all areas. So what are the other options?

The third element of debate could centre on how a well established LEP would function alongside an EPB or a combined authority. The highly prized value of strong business engagement could be at risk if the influence of business on economic decision making and investment was seen to be diluted.

One thing is certain, and that is the need for stronger local governance and decision making in relation to economic development across all stakeholders and tiers of local government.

Whatever the solution, whether a Combined Authority, Economic Prosperity Board or something else, key decisions have to be made in each local area to earn the right for the levels of devolution of decision making and funding that the Heseltine Review promises us.

Andrew Bacon, chairman of Leicester and Leicestershire Enterprise Partnership; and director, British Gas

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