Should LEPs ‘opt-in'?
In a recent blog post we argued that LEPs should prioritise focussing on spatial rather than functional/thematic issues; as genuine ‘place makers' they are best placed to do this as part of the overall growth agenda. Activities in the areas of transport, other infrastructure and housing fall naturally in this camp.
From next year LEPs will also gain strategic oversight of a range of EU funding streams, with delivery across 2014-2020. In the past around 50% of these EU funds was retained by government for national programmes, but the next round will see up to 90% of these funds strategically managed by LEPs as part of their local economic plans. This will be the equivalent of around £5.3bn over the period.
These EU funds have to be spent in thematic areas such as innovation, SME competitiveness, low carbon, employment, social inclusion and skills. This divergence between LEPs as place makers and LEPs as local thematic leaders could end up, just as with RDAs, diluting focus and strategy. The Social Market Foundation found that most businesses agreed with the statement
RDAs became “bloated” and “tried to do too much.”
Could LEPs fall into the same trap?
EU funds will require match funding for projects to go ahead. These will have to be sourced from either the private sector, civil society, public sector (both local and national) or national opt-in service offerings.
This ‘opt-in' model is a new route for this round of EU funding. Through this route national programmes outline a service offering that they will deliver within a LEP and the level of match funding they will provide if that LEP chooses to opt-in. These offers presently include:
- Manufacturing Advisory Service
- UK Trade and Investment
- The European Investment Bank
- The Big Lottery Fund
- The Skills Funding Agency
Other national programmes are looking at the offers they could make and LEPs can also make suggestions for other national organisations or programmes they would like to see provide an opt-in service.
While the development of LEPs and their responsibilities is a fast moving and changing landscape, this opt-in route may be a useful way to allow LEPs to focus on the spatial issues such as infrastructure, where their local knowledge and expertise can add value, while contracting out thematic areas to national organisations.
This would allow LEPs to maintain a focus on overall economic strategy and not get bogged down in having to design and develop a range of local thematic service offerings from scratch.
Initial reports suggest LEPs are keen to use this service and it is easy to see why, LEPs:
- Gain match funding for their activities
- Set strategic priorities for a national service within their area
- Allow a coordinated approach for sectors, clusters and supply chains across the country
- Retain oversight and control through reporting and monitoring by the LEP Board
Inward investment and export support is an area where previously RDAs came under criticism for duplication, a plethora of international offices with regions competing against each other, and a vast array of duplicated centres of excellence.
Rather than go down that route, LEPs can simply opt-in to the UK Trade and Investment service offering which includes:
- An aim to double the current UKTI activity within the opted-in LEP
- A 100% funded full time International Co-ordinator post (who would promote the internationalisation agenda at a local level and help connect companies and clusters across the country)
- Access to a minimum of one-fully funded International Trade Advisor
- Deployment of a UKTI Innovation in Services Fund (which would essentially further localise the support UKTI offers)
- Quarterly reporting to LEP Boards
Evolving through revolving
The EU funding space represents a real opportunity for LEPs in another way – the ability to develop revolving funds. Providing a long term source of funding for local activities geared toward growth. The Growing Places Fund provides an early example of this. LEPs were allocated a share of £730m to address infrastructure constraints holding back the delivery of jobs and housing.
Of the £380m allocated by LEPs through the fund by January 2013, £1.9bn was leveraged in from the public and private sector (the majority, £1.4bn, from the private sector). The majority of this early allocation was given as a loan, with the interest and capital repayments going back into a revolving fund to be reinvested in the LEP area.
The guidance provided to LEPs suggests four potential areas where they may like to set up revolving funds:
- Access to Finance offerings for SMEs
- Urban Development and Energy Efficiency Investment
- Social Housing Investment for low-carbon retrofit
- Local Impact Funds
How will we know if LEPs are adding value?
Such revolving funds may help LEPs to stand on their own feet in the future, especially as the public sector funding environment grows more difficult. However within all this space, a crucial question comes up, how will we know if LEPs are adding value?
There needs to be a greater focus on outcome and output metrics as opposed to the input and activity based metrics some are suggesting. This is a subject we will turn to in a future blog post.