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Devolution to LEPs could add £144bn a year to the economy by 2020 say key business and council figures

Author: Localis   |  

Devolution to LEPs could add £144bn a year to the economy by 2020 say key business and council figures

In a report published today by the think-tank Localis on the future of Local Enterprise Partnerships (LEPs), leading stakeholders have suggested that if LEPs get the devolution that they have requested from central government, England’s regions could be contributing an extra £144bn a year to the economy by 2020.

The prediction comes from a survey of more than 150 key stakeholders – including council leaders, council chief executives, LEP chairs, LEP chief executives and LEP private sector board members – which asked for forecasts of the size of local economies in 2020. The aggregate responses pointed to an English economy worth £1,600bn if the present level of devolution is maintained.

But if LEPs get the powers and funds that they have requested from central government in the next parliament, the survey respondents expect the English economy to be worth £1,744bn by 2020. The impact of increased devolution would therefore be an additional £144bn worth of annual economic activity across the country by the end of the decade.

The report, which involved interaction with all 39 LEPs, provides a framework for devolution to LEPs over the next five years and highlights the economically important strategic role that LEPs play in local areas across the country, successfully marrying private sector entrepreneurial vision with public sector know-how.

However, while the report does find that LEPs are viewed positively by their stakeholders (60% rated their LEP to be good or very good), it also suggests that there is room for improvement, finding that much of the £18.5bn allocated to LEPs since their 2010 formation has been determined by central priority.

To enhance the positive role LEPs play in growing local economies, the report recommends that:

  • The next Government should strengthen LEPs by devolving down £12bn of funding annually. This figure would double the £6bn proposed by Lord Adonis in 2014.
  • Local economic spend should be characterised by a ‘dual lock’ approach where both council leaders and the LEP have to sign off on annual budgets, so ensuring that LEPs continue to play a strategic role while maintaining local government’s democratic importance.
  • Skills should be a fundamental element of the devolutionary push. The report argues that by abolishing the Skills Funding Agency and transferring its £4bn of funds to the LEP level, skills programmes can be tailored to help local supply best meet local demand.
  • And by making available £280m of annual capital spend to LEPs, they can help deliver treble the current number of University Technical Colleges by 2020 too.
    However, the report also recognises that any devolution of funds and powers must be counterbalanced by greater transparency and accountability within LEPs, recommending that LEPs publish their accounts, minutes and board member email addresses. The report also suggests the possibility of directly electing LEP chairs, and encourages LEPs to address the lack of representation from BME communities (currently 3%) and women (17%) on LEP boards so as to better represent their local business communities.

‘The Next LEPs’, sponsored by Lloyds Banking Group, will be formally launched on Monday 2nd March at 1:30pm in the Churchill Room, House of Commons. Speaking at the launch will be Minister for Government Policy, Rt Hon Oliver Letwin MP, with a panel debate to follow with speakers including Clive Betts MP, Lord Shipley, Cllr Philip Atkins and Mike Blackburn (Chair, Greater Manchester LEP).

Launching the report, Alex Thomson, chief executive of Localis said:
“The key finding of the report is that LEPs need to remain nimble and unbureaucratic, while retaining their crucial strategic input into local economies. Our research shows that they have the potential to make a massive impact on our national economy in the next parliament if they get the devolution they’re looking for.”

Lord Blackwell, Chairman of Lloyds Banking Group said:
“As one of the UK’s largest Retail and Commercial banks, our reach in supporting businesses stretches across multiple sectors – for example housing, infrastructure and education. These are the types of sectors referenced in today’s report and a long-term commitment to these is crucial for the sustained economic growth of our country. We are delighted to have sponsored today’s report, which acknowledges the role that businesses can play in collaborating with public sector leaders through the Local Enterprise Partnerships. The LEPs are key to growth and can help us to achieve our aim of helping Britain prosper.”

The report has attracted support from a range of cross-party figures:

Chuka Umunna MP, Shadow Secretary of State for Business, Innovation and Skills “Local Enterprise Partnerships (LEPs) have a crucial role to play in driving local growth and ensuring that areas can make the most of their strengths. As part of Labour’s drive to decentralize power to local communities we would ensure LEPs have the powers and budgets they need, helping them represent local businesses and building on best practice across the country. I welcome the fact that Localis is helping to contribute to the discussion on the future of LEPs, examining in detail the opportunities and challenges facing them in the years ahead.”

James Morris MP, Chair of APPG on Local Growth, Local Enterprise Partnerships and Enterprise Zones “The report from Localis makes an important contribution to the debate about the future of Local Enterprise Partnerships with policy ideas which further advance the cause of giving local areas more control over the economic development of their areas.”

Julian Huppert MP, Liberal Democrat MP for Cambridge and member of the Home Affairs Committee “LEPs represent a new way of working with funding and decision-making devolved from government to local people who know their local areas best. This report examines the role they play, how they have been received and how their framework can be reformed to take them forward. It presents a strong analysis of localism in action and offers some interesting concepts for the future.”

Andy Street, Chair of Greater Birmingham & Solihull LEP “[This report] is a valuable contribution to the crucial debate about economic growth and shows that the future of LEPs is a very bright one. With our general election just 2 months away it is clear that whatever the outcome LEPs will continue to have a pivotal role in regional economic development.”

Mike Cherry, FSB National Policy Chairman, Federation of Small Businesses “We welcome this report, particularly the call for small businesses to have greater representation on LEP boards. This echoes the recommendation made in FSB’s report into Local Enterprise Partnerships that called from them to have more resources but not without reform. Greater transparency is needed to ensure they are accountable to the taxpayer.”

ENDS

Press enquiries:
Jack Airey, Researcher
020 7340 2660 (office) | jack.airey@localis.org.uk

Notes to Editors:
1. The full findings of the report are as follows:

  • While some LEPs do not seem to reflect a functional economic geography, there is no desire on the ground for a drastic re-organisation of the geography and thus number of LEPs
  • LEPs have been allocated £18.5bn worth of public money to spend thus far, but this has in large part been determined by central priority. Ending this ringfencing of funds, as well as guaranteed funding levels, remains a key ask of many LEP stakeholders.
  • LEP stakeholders reject the notion of LEPs being incorporated as statutory bodies by a margin comfortably more than two to one
  • LEP stakeholders think high tech manufacturing and knowledge services will see the most resource allocated to them over the 2015-2020 period, and prioritise the skills budget as the key devolutionary ask of central government
  • There is a need to ensure sufficient transparency and accountability before significant further funds are devolved
  • Many LEPs perceive themselves to be understaffed, but few are calling for the replication of the 3,000+ staffed network of RDAs
  • LEPs hold a unique position between public and private sectors, and offer an ability to rebrand economic geographies for the purposes of inward investment
  • LEPs have a strong role to play in housing delivery, offering strategic guidance and a business voice
  • There is a significant role for LEPs in lending their business led expertise to the local investment of public money

2. The full recommendations made in the report are as follows:

  • All party manifestos should specify a figure to be devolved to the sub-regional level which they guarantee as the minimum level of resource – uprated with inflation – for the next ten years
  • LEP boards should each contain a representative from one local business body (e.g. CBI, FSB, Chambers of Commerce) and one from a local trade union with the most density
  • Legislation should be passed enabling LEPs to fulfil a ‘dual lock’ function on newly devolved economic spend
  • LEPs should be given the formal requirement to publish the email addresses of board members, regular and transparent accounts and be subject to the Freedom of Information Act
  • A strategic lead for the key areas of skills, local infrastructure, innovation and communications, employment support, housing and business support should be funded in each LEP by central government. This would cost up to £18.3m per annum.
  • In terms of flexibility (as a bare minimum), the government should ‘un-ring fence’ an additional £70m of revenue spend from existing local growth settlements from 2015/16 onwards
  • LEPs proactively approach stakeholders across financial, construction, automotive and any other local growth sector with a view to appointing new business envoys
  • The government should make available a second PWLB project rate worth up to £10bn to any LEPs that can deliver on expected housing shortfalls
  • To incentivise this, they should offer ‘housing deals’ regarding the retention of the stamp duty receipt from up to 100,000 new build houses sold at under £500,000 to LEPs. This would cost an estimated £35m per annum.
  • The government should pledge up to £600m of annual business rates growth to LEPs by 2020 by way of match funding contributions from local authorities
  • In the most advanced LEPs – those around urban areas with combined authority status, the more dynamic country or multi-county arrangements and those with a record of using Local Growth Fund monies effectively – full devolution of the above.
  • Co-commissioning of the work programme with LEPs should be targeted for 2017/18
  • Should the 2015/16 Local Growth Fund be spent effectively, an additional £1.1bn of annual transport monies should be devolved to LEPs
  • All LEPs should be in a position to receive all the powers and funds outlined in this report by the end of the next parliament. If they are not, the government should set out why they believe this is not the case.

3. 39 Local Enterprise Partnerships (LEPs) have been formed since the Government invited businesses and councils to submit proposals to do so in 2010. They are now firmly established as the Coalition Government’s key vehicle for catalysing local economic growth delivery and will continue to do so regardless of who wins the next election. Lord Heseltine, in his major report No Stone Unturned, recommended that LEPs have a far greater role in local economic growth delivery. Lord Adonis, in his Growth Review for the Labour Party, echoed this, suggesting that £6bn a year be devolved to LEPs.

About Localis
Localis is an independent think-tank dedicated to issues related to local government and localism. We carry out innovative research, hold a calendar of events and facilitate an ever growing network of members to stimulate and challenge the current orthodoxy of the governance of the UK. Please visit www.localis.org.uk for more information

About Lloyds Banking Group
Lloyds Banking Group is a leading UK based financial services group providing a wide range of services, mostly in the UK, to individual and business customers. Our main business activities are retail and commercial banking, general insurance, and life, pensions and investments. We provide our services under a number of well recognised brands such as Lloyds Bank, Halifax, Bank of Scotland and Scottish Widows and through a range of distribution channels including the largest branch network in the UK. The Group is quoted on the London Stock Exchange and the New York Stock Exchange and is one of the largest companies in the FTSE 100 index of leading UK companies.