On 28 October 2010 the Government announced the 24 Local Enterprise Partnerships (LEPs) outside London they consider ready to go to the next stage and establish their boards. Large areas of the North East, East Anglia and the South West of England as well as the Black Country are notable by their omission. Some local authority areas are covered by two LEPs; for example Lichfield and Tamworth. A map of the areas and the partnerships is available online.

The White Paper "Local growth: realising every place's potential" provides some more detail about these embryonic organisations.

The board itself

LEPs will not be established by statute. Half the board will normally be representatives from business. A prominent business leader will take the chair, except where there is an elected mayor. We consider that board members will insist on the limited liability that comes from operating as an executive arm of a corporate body. Therefore, they are likely to take one of two forms:

  • the board of directors of a company limited by guarantee established as the LEP for the area; or
  • a joint committee of the constituent local authorities, leaving one authority to take the lead on employing staff, owning assets and managing liabilities on behalf of all.

We believe that many LEPs will adopt the joint committee route for the funding reasons explained below. This will need creativity within the constituent local authorities.

Funding

LEPs will be expected to fund their own day-to-day running costs. Government is encouraging LEPs to consider how "they can obtain the best value for public money by leveraging in private sector investment". It is not immediately obvious how or why businesses should invest in running costs until their remit and focus becomes a lot clearer. Local authority budgets are under severe pressure and therefore do not appear to be a fall back source of funds.

LEPs may in practice have to rely on local authorities for their administration, and perhaps outsource some services through the local chamber of commerce. As a result business planning will be a challenge and board members will be reluctant to serve as directors of a company limited by guarantee where funding is uncertain. Without secure revenue funding LEPs will be unable to plan ahead and keep staff.

Functions

The White Paper says that LEPs will provide clear vision and strategic leadership to drive sustainable private sector-led growth and job creation in their areas and suggests a possible range of functions as follows:

  • working with Government to set out key investment priorities, including transport infrastructure and supporting, or co-ordinating, project delivery;
  • co-ordinating proposals or bidding directly for the Regional Growth Fund;
  • supporting high-growth businesses, for example through involvement in bringing together and supporting consortia to run new growth hubs;
  • making representation on the development of national planning policy and ensuring business is involved in the development and consideration of strategic planning applications;
  • leading changes in how businesses are regulated locally;
  • strategic housing delivery, including pooling and aligning funding streams to support this;
  • working with local employers, Jobcentre Plus and learning providers to help local workless people into jobs;
  • co-ordinating approaches to leveraging funding from the private sector;
  • exploring opportunities for developing financial and non-financial incentives on renewable energy projects and the Green Deal; and
  • becoming involved in the delivery of other national priorities such as digital infrastructure.

Much depends on the existing levels of joint working between the authorities and the revenue funding available. There is a huge difference between the established working arrangements which have developed into the City Region proposals in Greater Manchester, Leeds and Sheffield, compared with the diverse areas served by the Marches. Some LEPs will try to fill the vacuum left by the Regional Development Agencies (RDAs) and lead the agenda for their area. Others will take a more supportive role, leaving their business and local government constituents to drive forward delivery.

LEPs will not have a role in setting skills strategies or delivering training. Innovation and access to business will be led by central government. Regeneration will be an important task for the Homes and Communities Agency (HCA) outside London, although it may work through the LEPs to integrate local government and business needs. The role of LEPs in inward investment is not yet clear.

Winding down the RDAs

The abolition of RDAs outside London is part of the Public Bodies Bill. However, the London Development Agency will be abolished as part of the Localism Bill and the wider changes to the government of London. New delivery arrangements for European Regional Development Fund (ERDF) programmes are yet to be worked out.

RDAs are currently committed to some £1.2 billion of programmes and projects. The White Paper encourages RDAs to "seek to exit from projects unless doing so will offer poor value for money, or would impact upon key flagship projects which might be continued by local authorities, local enterprise partnerships or other successor bodies".

Staff transfers

The White Paper acknowledges that Transfer of Undertakings (Protection of Employment) Regulations (TUPE) and the Cabinet Office Statement of Practice on Staff Transfers in the Public Sector will apply to RDA staff where RDA functions are transferred to the LEPs. This is likely to be time consuming and difficult, as different LEPs within an area assume different functions. Also, in some areas the LEPs approved to date only have limited coverage of the RDA area; the North East is the best example.

The potential for staff transfers will influence the kind of body established to operate as the LEP, and complicate the task of setting up its delivery structure. RDA staff may find themselves transferred to local authorities, new corporate entities, or even outsourced delivery agencies within local Chambers of Commerce. The ongoing revenue support needed to employ staff and take on their pension commitments will be another funding headache for the new boards.

RDA assets

RDAs have some £500 million of land assets and many are balanced by liabilities. The department for Communities and Local Government (CLG) will manage the disposal of land and property. The department for Business Innovation and Skills (BIS) will manage the disposal of business and technology related assets. There will be an overall Transition Board with CLG, BIS and Treasury membership, but BIS will take the lead. The White Paper sets out some clear principles:

  • assets will be disposed of with associated liabilities wherever possible;
  • the aim will be to achieve the best outcome for the region, consistent with achieving value for the public purse.
  • As for individual cases the following considerations will also apply:
  • the existing statutory framework governing RDAs remains in place so disposal decisions will continue to follow the RDAs statutory purposes. An example is the need to further the economic development and regeneration within the relevant area;
  • the planned new owner must be capable of ensuring the asset will prosper within its custody, or that any liabilities will be properly handled;
  • local demands and ambitions should be met, so far as possible, by the proposed approach;
  • a reasonable balance should be reached as part of disposal/transfer between national deficit reduction, national policy aims and local ambitions/opportunity;
  • an appropriate balance should be struck between the purpose behind an asset's purchase and the views of localities on best use; and
  • an appropriate balance between capacity, risk and the Government's commitment to localism is to be ensured.

There will be no presumption of a disposal to a particular local authority or LEP. Some of these considerations mask conflicting policy aims, such as deficit reduction and local ambitions/opportunities.

The 24 LEPs now setting-up their boards will begin to grapple in earnest with these tensions as they try to sort out staffing arrangements, budgets and transfers of assets and liabilities as they build on their successful applications.

What is clear is that central government is firmly in the driving seat.