LEPs hold the keys to growth

Centralisation has for too long been choking off growth. There is a clear consensus across the political spectrum that power and decision making needs to be devolved, and that local people are best placed to drive local economic growth.

Whilst there is broad agreement on the overall direction of travel, what is not yet clear is how the devolution momentum can best be harnessed to achieve the right conditions for growth. Ever more devolution deals, the creation of more combined authorities and the formation of new subnational bodies are all exciting developments, but they also mean that the local landscape is becoming ever more complex. Nowhere is this more the case than for Local Enterprise Partnerships (LEPs).

In bringing together the private and public sectors LEPs are uniquely positioned to play a pivotal role. And it was clear at the recent LEP Network Annual Conference that there have been some significant achievements. To date a total of £5billion of private sector leverage has been secured by LEPs. Direct impact of the work of LEPs includes 115,000 new jobs; 71,000 new businesses and 16,000 new homes.

However, there remain significant challenges. According to the National Audit Office the approach taken by DCLG to overseeing Growth Deals risks value for money. LEPs themselves have expressed reservations about their capacity to deliver. Only 5% of LEPs feel that the resources available to them are sufficient to meet the expectations placed on them by Government. The estimated underspend for 2015/16 is £85million, over a third of the total budget for the year.

Speaking at the LEP Network annual conference, Communities and Local Government Minister James Wharton acknowledged that the role of LEPs will need to flex and change as the devolution agenda continues to evolve. But it was absolutely clear, in both his and Secretary of State Greg Clark’s comments, that LEPs remain as integral a part of this agenda as ever. They took the opportunity of the conference to announce that £20 million core funding for LEPs has been secured for 2017/18, and the next phase of Local Growth Fund (£1.8billion) is now available for LEPs to bid for projects that will boost local economic growth.

The key question is what is needed to enable investments which will deliver economic growth. It is understood that transport is central to unlocking growth, which is why transport infrastructure investment accounts for more than half of all allocated Local Growth Fund so far. But transport needs to be understood in terms of a wider growth strategy.

Heseltine’s report “No Stone Unturned” has greatly influenced the Government’s thinking. Osborne purportedly supported 81 of the 89 recommendations at the time. The Local Growth Fund arose directly from it, although at £12billion it is only a fraction of the £58billion originally envisaged by Heseltine. One recommendation which the Chancellor didn’t support, however, was for the formation of a National Growth Council. Perhaps this felt too much like 1970’s style state planning. There was more support at the time for a “national growth strategy”, but without a body of some kind with responsibility for developing and monitoring that strategy it is difficult to imagine how such a strategy would have any real influence.

What was crystal clear in Heseltine’s report was that Government needs a single compelling vision for how wealth will be created in the UK, and that all parts of Government need to work in support of that plan. He advocated a significant devolution of funding from Government to LEPs, but crucially this needed to be accompanied by a clear statement by Government of its priorities to guide LEPs in preparation of their strategic economic plans.

In the event, significant capital funds are being devolved to LEPs but without the necessary guidance and without a national growth strategy. And there are also troubling issues around accountability and transparency. According to the National Audit Office 42% of LEPs do not publish a register of interests, and less than half feel that that there are clear lines of accountability from the LEP to the electorate.

And all of this is against the backdrop of massive cuts to local authority budgets where revenue funding has been squeezed, to the point that in some areas all but statutory services are at risk of being axed. The result is that local government expenditure on pro-growth measures such as housing, planning and economic development has reduced disproportionately.

So LEPs have been given a hugely challenging brief. In the absence of a national growth strategy, they should at the very least have access to the tools and information they need to make investments which will deliver growth. For its part Greener Journeys has built up an extensive evidence base on the excellent returns that can be achieved from investment in bus infrastructure – up to £7 of net economic benefit for every £1 invested – and we continue to share our findings with LEPs. But much more needs to be done.