So the government has announced its plans for economic development on the cheap. Regional development agencies will be replaced by Local Enterprise Partnerships by March 2012. The state of the government’s finances means that this is going to be a no-frills version of the economic policy of the past decade. But does this necessarily mean cities will be short-changed?
LEPs – partnerships between local authorities and businesses based around real economies – are a good idea, but it’s likely that the transition will be messy and expensive (see the National Audit Office report on reorganising government). The new institutions are going to have an important role in helping the government to achieve its objective of ‘rebalancing the economy’. Their top priority will be helping to generate more private sector jobs, as the public sector shrinks in England's cities. This will be difficult because some cities are better placed than others to generate these jobs. Between 1998 and 2008, 37,200 private sector jobs were created in Bristol while Stoke lost 20,900 private sector jobs.
LEPs' predecessors, the RDAs, were an expensive policy intervention. Between 1999/2000 and 2006/07 the agencies spent £15.1bn. In this financial year they were due to spend £1.7bn, according to the Department for Business, Innovation & Skills, and this was reduced by £270 million as part of the government’s £6bn in-year efficiency savings.
LEPs will be left to fill the void of RDAs but it’s not clear what money they will have to do this. As well as the LEPs, the government also announced a two-year £1bn regional growth fund, which looks as if it will provide many of the projects previously delivered by RDAs (although LEPs will be able to bid for some of these funds). A number of RDA activities, like inward investment and business support, have also been moved back to the national level.
A pessimist, or perhaps a realist, might conclude that LEPs won’t be getting much, if any, money to spend in addition to their existing local authority budgets. If that is the case, what should LEPs be doing?
Significantly, the government has signalled that LEPs will have a broader role than the RDAs, including planning, housing, transport, employment and enterprise policy. This is important. Cities need a wide range of tools to help improve their business environment.
In fact, improving transport and housing and being supportive of new development are better ways of growing a city’s economy than attempts to create the latest flavour of the month industrial cluster, be it creative, biotech, sports or digital. Rather than delivering projects, an LEP's role is more likely to be about co-ordinating actions between local authorities and prioritising the right investments.
The government has now placed the onus on local authorities to respond. By September 6, local authorities will be expected to have finalised their LEP plans. One certainty is that they can rule out any costly new projects. But if LEPs do give local authorities a greater say over economic decision making, they could enable cities to deliver the private sector jobs the country needs.
Kieran Larkin is an analyst at Centre for Cities
