Do we need more institutions at the local level to support sectors?

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Regardless of the outcome of the General election, the UK still needs an industrial strategy.

EEF has responded to the current Government's Green Paper on industrial strategy including blogging on each of the pillars. This blog covers the final pillar, number 10, on bringing together sectors and places.

The Green Paper sets out the challenge as the government sees it:

“Consider the best structures to support people, industries and places. There may be missing institutions, or existing ones we could strengthen, e.g. local civic or educational institutions, trade associations or financial networks.”

There are already two pillars on sectors and places, so the principal question under this pillar is - what more needs to be done to strengthen the link between both. The question being - what institutions are needed to support specific sectors in the places in which they cluster?

Institutions already exist

As the Green Paper notes, there are already local leadership institutions such as LEPs, local authorities and soon Mayoral Combined Authorities.

The Green Paper also notes the role of ‘anchor’ businesses in attracting skilled workers to an area. However the extent to which we should be seeking to increase local reliance on one or two dominant companies is debateable – given the negative impact the closure of such a business would have.

A far more sensible approach would be seeking to create the most fertile modern business environment across the country to ensure that any business can start and grow. As we outlined in our review of the place pillar, some work is already being done through Devolution Deals to make this happen.

Does the government need to do more?

Before there is a rush to create new institutions a stocktake on the existing ones for local leadership makes sense. The Green Paper announced a plan to review the role of LEPs in delivering local growth.

Back in August 2010, the Coalition Government invited local authorities and businesses to come together to create LEPs to replace RDAs with the following remit:

  • Role: To create the right environment for businesses and growth in their areas by tackling issues such as housing, planning, transport and infrastructure, employment, enterprise and a transition to the low carbon economy.

  • Governance: Equal representation from businesses and local areas with the LEP Chaired by a business.

  • Size: Reflect the real functional economic and travel to work geographies across England

Since then a lot has changed in the structures to support local growth. Notably the placed-based Deals process which has seen the focus shift away from LEPs towards local authorities coming together and working strategically across their functional economic area.

Regional policy decisions will increasingly require a regional mandate

In a lot of areas there were significant amounts of low hanging policy fruit, relatively uncontroversial, which LEPs could pluck and deliver on quickly. As things move on, there will be decisions that require trade-offs – will these require a democratic mandate that LEPs don’t have? Potentially.

As part of the Government’s review we believe that before there is a rush to create new institutions the government should first set out a clear role for LEPs.

That role should be a ‘task and finish’ one, where the clear task for LEPs is to build consensus on a shared ambition across a functional economic area and the challenges in meeting that ambition. The task will be ‘finished’ when that functional economic geographic agrees a Devolution Deal with a single governance point (i.e. a Combined Authority or Unitary Authority).

But as we set out last year, not all areas can sign up to a devolution deal for various reasons. In those areas the government should also incentivise local authorities to scale up and merge through fiscal incentives. Local authorities can play a crucial role in economic development, but not in their current fragmented state (over 300 local authorities in England).

Tackling that, is a better first step than adding even more local institutions to the mix.

Author

Head of Business Environment Policy

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