Localism agenda needs close scrutiny

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Last autumn EEF gave a cautious response to the headline recommendation in Lord Heseltine's review of growth policy – the idea of consolidating central government funding for local spending in areas like infrastructure, skills and business support and allocating it directly to local areas on a competitive basis.

We acknowledged the potential benefits of devolving spending decisions to the communities they impact, but cautioned that it may not be appropriate in some areas, such as skills, and that local organisations would need to be up to the task of bidding for and taking on significant new spending responsibilities.

Things have moved on since last autumn. The government's has endorsed the proposal by committing to devolve a greater proportion of growth-related spending from April 2015.

It has also clearly suggested that it envisions LEPs as the bodies that will compete for money from the ‘single pot' by saying that it will devolve spending on the basis of the growth strategies it has tasked them with developing.

This raises some serious some questions. Two sets of questions stand out. First, what areas of spending would actually benefit from being devolved to LEPs? Second, what happens in parts of the country that fail to secure any funding?

What will be the criteria for deciding which areas of spending should be devolved? There are doubtless some areas where putting LEPs in charge could lead to better outcomes. However, there are other areas, such as skills, where it might be counterproductive.

The Richards Review of apprenticeships seems to have finally pointed the government in the right direction on skills. Involving another, unproven, intermediary in the process, risks undermining the employer-led approach it recommends.

Heseltine has proposed running competitions for local funding every five years starting in 2015. This begs the question of what happens to the provision of services like business support and transport in areas that fail to secure funding? Are they left to wither for half a decade? Or, would some alternative, basic, funding be available?

The government will need to start answering these questions, and a host of others, if it is to commit to major devolution in spending decisions as part the upcoming Spending Review.

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