29 October 2010
Concern is mounting that the government’s new measures to boost local economic growth will not be an adequate replacement for regional development agencies.
Yesterday the coalition published its whitepaper on local growth and gave the green light for the formation of the first wave of local enterprise partnerships. The strategy is being supported by a £1.4bn Regional Growth Fund, which the 24 LEPs must now bid for.
But reaction to the plans was mixed, with experts warning that areas most in need of support for economic growth were not covered by the first round of LEPs and that the new funding pot fell short of what had previously been given to RDAs. The government expects the gap to be filled by private investment.
Ed Cox, director of the Institute for Public Policy Research North, said the Regional Growth Fund, which is to be spread over three years but is the equivalent to the amount RDAS were receiving each year, was ‘clearly not going to be able to fund everything’.
It was also clear that LEPs were ‘unlikely to be well-resourced,’ he warned, adding that it was ‘extremely concerning’ that some areas with high economic development needs have not yet established LEPs - places like Tyneside, Hull and Humber and Lancashire.
Anna Turley, deputy director of the New Local Government Network, echoed his concern. Losing the RDA in the north east was ‘a big blow’, she said. She added that LEPs would not be ‘channelling’ public money, as RDAs had, but would need to focus on ‘working together better at local level and engaging the private sector’.
Cox called for the Regional Growth Fund to be prioritised on areas more reliant on the public sector and where unemployment is already high. He said: ‘This is particularly important in the North given that spending cuts will have a disproportionate impact on the North and will deepen the North-South divide.’
David Sparks, vice chair of the Local Government Association, also raised concern about the gap between the budget for RDAs and the new growth fund. ‘Councils are now having to look for other partners to take the place of RDAs in regenerating their areas. Those partners will not come with the same kind of money. We must therefore make sure that councils are supported so they can make the most of the new mechanism available to them to boost local economic growth,’ he said.
Shadow business secretary John Denham added: ‘The Regional Growth Fund is a pathetic fig leaf to cover the absence of any plan for growth. Regional funding has been cut by at least two thirds, all key decisions are being centralised in Whitehall, the new LEPs are a shambles and leave areas of the country with no effective development organisation, and the voice of business is being ignored on everything from planning to investment and to skills.’
But plans in the white paper to allow local authorities to keep the money they raise from local business rates were received more positively.
Sparks said: ‘We have long argued that councils should be rewarded for their hard work in supporting economic growth in their area. Allowing them to keep the money they raise locally, which can then be ploughed back into their communities, will provide the incentive for local authorities to drive economic development.’
The CBI, however, said it was concerned about ambiguities in the proposals. John Cridland, CBI deputy director general, said: ‘If this means re-localising rates, the CBI is opposed to giving local authorities power to set these. Such a change would mean that businesses would face unknown varying levels of tax across the country. The CBI is determined to retain the nationally set Uniform Business Rate.’
But Cridland welcomed the fact that the government had responded to its concerns that LEPs would be too small. ‘The CBI is encouraged by the economic scale of many of the approved LEP proposals. This gives LEPs the ability to focus on business-led regional growth, through transport and planning, and by attracting inward investment and promoting key industries,’ he said.
