By Richard Johnstone | 29 April 2013
The government has been urged to back down on plans to make Local Enterprise Partnerships compete for a share of the proposed single local growth fund after a warning that such an exercise could be a waste of money.
In the Budget on March 20, Chancellor George Osborne said he had accepted Lord Heseltine’s recommendation to establish a single funding pot to boost economic development. This will devolve some Whitehall cash for skills, housing and transport to LEPs from 2015, with total amounts to be determined in the Spending Review on June 26. Heseltine had proposed that as much as £49bn could be included.
Osborne said all 39 LEPs would negotiate a local growth deal with the Treasury for funding to be distributed on a competitive basis, reflecting the quality of local plans.
LEPs, which were created when the coalition government came to power in 2010, are intended to help councils and local businesses work together to stimulate growth across an area.
The Treasury said that ‘competitive tension’ in the allocation of funds would ‘strengthen incentives… to unleash local areas to generate growth and drive collaboration’.
However, the Core Cities Group has told Public Finance that the plan to individually assess plans from each partnership could be wasteful when public money is tight, and should be dropped.
The group, which represents the eight core cities in England outside London, called for the pot to be allocated on the basis of each area’s economic activity or population.
Director Chris Murray said member authorities would be making a submission in mid-May to set out how they would like the scheme to work.
As the government is cutting spending, it should just ‘get on with’ dividing up the funds without the need for a bidding process, he said.
‘This is about government making choices with scarce resources and not wasting time on bidding. That’s what we would be doing with bids, and that just seems very wasteful. We think just get on with it.’
Ben Still, chief executive of the Sheffield City Region LEP, which comprises nine local authorities, hopes for ‘a fully devolved single pot’.
He told PF that if more than a quarter of the funds was decided by competition, the government would be asked ‘whether it is letting go or not’.
Still added: ‘If government wants to have a competition of the first round, let’s put in 75%–80% through an allocation and around 20%–25% on competition. That’s something most places could live with.’
But James Morris, who chairs the House of Commons’ all-party parliamentary group on local growth, told PF a competitive element in funding could ‘drive up the quality and effectiveness of LEPs and local decision-making’.
In Morris’ view, the plan for a single pot offered a ‘massive opportunity’ to boost local growth. The single fund must ‘move away from the idea that cities and LEPs must justify their take from central government’.
He added: ‘This should be very much more about them getting into control and taking decisions on what they think is appropriate for this area, and not an ongoing negotiation for their area.
‘I think the single pot takes us away from that, but not completely away from that, and we need to go further.’
