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.
A version of this article first appeared on Public Finance
