A more top down approach to local economic development?

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Could the local economic development landscape be set to change again? A series of speeches and announcements this week have outlined the Labour Party's proposals in this space.

While Labour has always said it would build on the existing frameworks put in place by the coalition government (crucially agreeing not to reintroduce RDAs), the announcements this week were billed as 'ending a century of centralisation'.However, these proposals look more centrally driven with an ambition for a more uniform structure. The chart below shows how frequently local growth ideas have been implemented over the last four decades ('X' shows initiatives which were subsequently cancelled).

4 decades of local growth initiatives - Source: NAO

Following their announcements this week, Labour has written to LEPs and local authority leaders asking them to put in place plans in preparation for the first year of a possible Labour government after May 2015. The proposals are outlined below set against the current arrangements introduced by the coalition and show a clear difference in approach.

The differences in approach

LabourCoalition
GovernanceCity and county regions should put in place stronger political governance either through Combined Authorities or Economic Prosperity BoardsLEPs decide what governance arrangements work best and submit this with their strategic economic plans.
BoundariesA single LEP that maps to city or county region boundaries. Greater powers, resource and clearer role in decision making.Local areas bring forward their proposals for LEP boundaries which can overlap. Secretary of State for DCLG/BIS approves boundaries based on functional economic area test.
FocusStrategy should focus on well-paid jobs and reducing productivity gap vs. top performing areas, along with growth.Growth is the focus with LEPs setting their own vision of what measures they will use. Most have gone for jobs, GVA growth, exports and innovation.
Pay backCity/county regions benefit directly from the proceeds of growthSome areas through City Deals can retain business rates locally.All local authorities can benefit from business rates retention; some have pooled this to share growth.
Central coordinationRegional Ministers coordinating sub regional initiativesA Regional Cabinet Committee with all Regional Ministers and Minister for the Cabinet Office‘Whitehall Champions' who are DG level civil servants navigate the Whitehall machine on behalf of their LEPsLocal Growth Cabinet Committee with Secretaries of State and Ministers from all spending departments to sign off on Local Growth Deals, Regional Growth Fund bids, City Deals and other local initiativesLocal Growth Teams combining existing civil service regional teams within each Department using BIS Local Regions

Beyond 2015

Irrespective of who wins the election, LEPs will deliver at least one year of their Local Growth Deals from April 2015 to March 2016. However, during this delivery (if Labour wins the election) the prospect is for some elements to be renegotiated from boundaries, to funding to the objectives behind local strategies.

It is unclear what would happen to the capital funding within the Single Local Growth Fund (roughly £1bn of the £2bn devolved). To allow LEPs to put in place long term capital plans this had been guaranteed for five years.

This could be a difficult challenge for LEPs to manage. In less than 12 months they have prepared EU Structural and Investment Funds programmes, Strategic Economic Plans and negotiated City Deals. In the coming months they will have to negotiate their Local Growth Deals and Single Local Growth Fund allocation – while preparing for the implementation of these from next year.

EEF's view

The frantic development of strategies that LEPs have had to undertake (and now possibly more) leaves little time for them to up their levels of business engagement, which desperately needs to be addressed regardless of which system is in place from 2015.

A key question is whether or not LEPs can deliver. From our point of view LEPs should have to prove themselves before more funds and capabilities are devolved.We saw the Single Local Growth Fund of £2bn as a good start in the right areas (e.g. transport). Anecdotally we heard that some LEPs breathed a sigh of relief, as an even greater level of funding would have ramped up what was expected of them.

An incremental approach allows lessons to be learned and applied and minimises any potential backlash from a large-scale failure to deliver.

More broadly the focus has to be on genuine place-based challenges. A ‘me-too' syndrome destroyed the credibility of RDAs among most of the business community as they were seen to be pursuing any agenda, as opposed to one driven by defined challenges.

When it comes to choices about getting value for money from limited resources in the next spending review, the new government in office from May 2015 will need to carefully weigh the pros and cons of an incremental approach, which allows LEPs to prove themselves in a more structured way, against the challenges and potential risks of a big bang devolution of funds.

Author

Head of Business Environment Policy

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