No local economic partnership is expected to miss out on money from a Single Local Growth Fund which the government has committed to create, while those without “effective governance” will find their spending decisions constrained by “central controls”, the Treasury has announced.
The government’s response to Lord Heseltine’s ‘No Stone Unturned’ report also indicates the government’s preferred governance arrangement is for councils within local enterprise partnerships to create combined authorities, although a joint leaders committee is described as an acceptable “minimum”.
The detailed response, running to more than 60 pages, also details which areas of funding the government is minded to include in the single pot - skills, housing and transport in particular - as well as unveiling a set of criteria which are set to rule out the devolution of funding areas such as innovation.
The report also backs the creation of local growth teams of Whitehall officials, although it does not make clear whether these individuals will be created on the basis of LEP boundaries - as suggested in Lord Heseltine’s secondary report - or on a wider regional basis.
The government committed to a competitive bidding process for the single pot, an approach which was recommended by Lord Heseltine but questioned by some within local government because of concerns the lack of capacity or economic potential in some areas would mean they would lose out on funding.
As exclusively reported by LGC this month, LEP leaders told Whitehall officials that a one size fits all approach could fail given the varied capacity of LEPs across the country.
In response to these concerns, the government said it “expects that every LEP would receive something” but also warned that less developed LEPs - or those without “effective governance and joint working across the LEP area” - will have to work within “central controls on how the single local growth fund can be spent”.
The competitive process will see LEPs submit plans which are then subject to further negotiations before a final funding decision is announced. The response said the negotiation process would be iterative in order to “mitigate the risk of local areas missing out on greater benefits due to a lack of understanding of the assessment process or criteria”. However, ultimately, “the areas with the best plans will receive more from the single local growth fund”, the document said.
The government also linked the single pot process with the ongoing city deal negotiations taking place with 28 areas of the country, and the Treasury response promised that every LEP area will have a “similar discussion” about greater freedoms before the end of this parliament.
The Treasury indicated that its preferred governance arrangement would be for LEP councils to create a combined authority, and it also stated that it will bring forward legislation to allow directly elected conurbation mayors to be created where an area wanted to do so.
For those authorities not willing to create a combined authority, and such an approach would cause problems for the 37 councils who are in two different LEPs as they cannot be part of two combined authorities, the Treasury has said it will be satisfied with “binding and long lived decision making structures” such as a joint leaders committee “as a minimum”.
Birmingham & Solihull LEP, whose boundaries cross the Stoke-on-Trent & Staffordshire LEP, announced yesterday they would create a “supervisory board” of the LEP’s nine council leaders rather than a combined authority.
As expected, Lord Heseltine’s calls for unitary authorities were rejected, but the government said it would “not stand in the way of areas that would like to voluntarily pursue unitary status”. However, it added: “It would be preferable for local authorities to focus on coming together to share their operations” and the Treasury’s response paper pointed councils to the recently announced £9.2m Transformation Challenge Award.
The response paper indicated the challenge award funding is open to councils seeking to establish a combined authority as well as those considering shared service and management arrangements.
In the pot
The government sees transport, housing and skills funding “in particular as critical to the success of the fund”. The single pot “must include elements of all three budgets if it is to give local areas influence over the levers that matter for growth”, the Treasury said.
The government promised to look at the other funding streams suggested by Lord Heseltine, such as that for business support services, and the response also indicated the government’s a willingness for “aligning” employment support programmes with LEPs and the single pot.
However, the Treasury’s response ruled out the devolution of innovation funding as recommended in ‘No Stone Unturned’, arguing that “specialisation not duplication is essential”, and Treasury support for the single pot includes a number of caveats ahead of a final decision in the June spending review.
A set of five criteria for funds which should be exempt from devolution include “whether national or local decision-making best achieves the desired outcomes” or when there is “clear evidence that there are no efficiency gains to be realised from enabling greater local tailoring and coordination of service provision”.
The response noted “there are some funding streams where the principles…point strongly to the majority of spend continuing at national level”.
The Treasury document also made it clear the single pot fund, scheduled to be operational from 2015, would be subject to the cuts to be implemented in 2015-16 following a spending review over the next couple of months.
“This is in the context of the government’s priority to reduce the deficit and ensure the public finances remain stable,” the response said. “This will inevitably require tough choices, including across those areas where funding will be transferred to the Single Local Growth Fund.”
EU funding will also not be included in the single funding pot, because of European funding rules, but the government said it will align the funding streams to LEP areas and it also pointed out that “a much broader set of resources” is available including councils’ economic development funds.
The Treasury has already assigned a “senior Whitehall sponsor” to every LEP, as recommended by Lord Heseltine, and they have been asked to “work with [LEPs] and understand their priorities and ensure that Whitehall policies take into account their impact on a particular place”.
Lord Heseltine also called for the creation of local growth teams comprising officials from different Whitehall departments, and the Treasury has confirmed it will be “enhancing the arrangements in place for cross-departmental working” by developing these local teams.
However further details about the team personnel, size or location were not available and it is not clear whether the Treasury approach with the suggestion made by Birmingham & Solihull LEP on Sunday that core city LEPs get their own dedicated team rather than a more distant regional team.
The government is also making moves to address concerns that Whitehall does not understand or know how to deal with business.
As reported by LGC last week, local government figures such as Kettering BC chief executive David Cook have complained that Whitehall “lacks commercial understanding”. He said “most [Whitehall] officials have not had experience of dealing with developers, bringing commercial activity to market and making these growth proposals happen”.
The Treasury’s response paper promises to “ensure that civil servants forge closer ties and interactions with businesses and representative bodies and obtain the necessary skills to deliver pro-growth policies”.
As revealed by LGC last week, 12 councils are to work closely with the Government Property Unit to identify the best use of surplus public sector land. The Treasury’s response has detailed who those councils are:
Bristol City Council
Chester and Cheshire West Council
Hull City Council
Leeds City Council
Nottingham City Council
Portsmouth City Council
Sheffield City Council