The government has identified LEPs as the main vehicle for its commitment to devolve more control over spending in areas like skills and transport from 2015. More details are expected at the Budget and the Spending Review that will follow shortly afterwards.
This is a big issue. Lord Heseltine has proposed that the ‘pot' of money devolved be in the region of £60bn. That's more than five times the £10.8bn the budget of the Regional Development Agencies and more than twenty times as much as the £2.6bn Regional Growth Fund. Whilst there are undoubtedly potential benefits to making public spending more responsive to local needs, these are big decisions that seem to be being taken very quickly and with little consultation of stakeholders.
So safeguards must be built into the process to ensure that public money is used effectively and that services and infrastructure vital to business, like transport and skills, are not adversely affected.
First, there must be clear evidence that devolving control over funding delivers better value for money. There may be a strong case for giving LEPs responsibility in some areas of spending, in others, such as skills, the evidence points the other way and a national focus must be retained.
Second, LEPs must demonstrate the capability to take on significant new responsibilities. Some are legal entities that are well-established, well-resourced and well-connected to local businesses. Many others are still finding their feet, have minimal resources, limited engagement with local businesses and remain dependent on local authorities for receiving and distributing funding.
Finally, control should be devolved gradually. Rather than moving immediately to multi-year, competitive, allocations of tens of billions of pounds, to begin with limited funds in a small number of spending areas should be transferred to LEPs. Progressively larger sums, across a broader range of spending areas, could then be devolved over time as LEPs prove their value.