Departmental wrangling over the creation of a single pot for local growth investment should not defeat the plan because it is backed by the chancellor, Lord Heseltine has told MPs.
The Conservative peer and author of the recent review of government policy on growth was responding to concerns about Whitehall reluctance to hand over funding and decision-making powers to local areas.
Speaking to the business, innovation and skills select committee on Tuesday, Lord Heseltine said: “The chancellor is committed to the single pot and I cannot think of any chancellor who took such an active role in that sort of political activity.”
He had been asked by Conservative MP Robin Walker why his proposal for a single pot of funding would succeed when other projects such as Total Place had failed because of “government departments fighting their turf war”.
Lord Heseltine, left, said he thought there was “a difference this time” partly because of the chancellor’s commitment but also because of a wider recognition that things had to be done differently and decentralised.
There is “the understanding that we have got to change is very widespread across all parties, and that is a first,” he said. Another factor was that “the length of the recession has shaken many people who had [different] views of what should be done.”
However, he admitted there would “of course” be resistance from government departments to the removal of funding and decision-making powers. “We can be sure there will be resistance,” he said. But “this is for the government to determine. They have accepted the principle – the scale and breadth we will have to wait for a further statement around the time of the Budget.”
Lord Heseltine’s report recommended the creation of a single pot of funding made up of £58bn to be distributed over four years via a competitive bidding process between local enterprise partnerships.
The peer told MPs he had recently been informed the potential pot was larger than described in the report because local authority capital spending had been incorrectly listed as £4bn over the four-year period when it was £4bn per annum, increasing the pot to £70bn over the four years.
Select committee chairman Adrian Bailey (Lab) questioned Lord Heseltine about concerns that the bidding process for the pot could see some areas, including deprived areas, of the country lose out because they did not have the capacity to win bids.
Lord Heseltine said he believed there would be three categories of LEPs: “The biggest would be those that do a good job and put in a respectable bid”; others would “not do a good job and should have done” and a third category who “which for no fault of the LEP economies doesn’t have the strength inside itself to put forward a highly competitive bid”.
Based on his experience of the 1990s’ City Challenge, Lord Heseltine said the second category “who have failed to deliver in the first year, transform their performance” afterward.
For those who fail to win single pot funding because they have inherently weak economies, Lord Heseltine said central government should provide stimulus via nationally decided infrastructure programmes such as roads, ports and hospital building.
And he denied the committee chairman’s claim this approach would contradict the government’s focus on reducing the size of the public sector economy, and the dependence of some areas on it, in favour of private sector enterprise.
Lord Heseltine said this was not an accurate description of the government’s policy and pointed to the Regional Growth Fund and High Speed Rail 2. “The whole concept is to use public money to stimulate the economy,” he said.
Turning to skills, Lord Heseltine denied claims made by colleges and reported by Conservative MP Rebecca Harris that his recommendation for local employers and LEPs be more involved in skills provision would increase bureaucracy.
“Preserving the bureaucracy was not one of my priorities,” he said. “Any change is resisted by those administering the status quo, but that is not a good argument.”