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Local government should be given more power over economic growth, says Heseltine

Out-Law News | 01 Nov 2012 | 3:39 pm | 3 min. read

More responsibility for economic growth in regions and cities should be devolved from central government to partnerships between local government and the private sector, according to a new report.

In a Government-commissioned report (233-page / 2.4MB PDF) into creating the best conditions for economic growth, Conservative politician and former cabinet member Michael Heseltine recommends giving Local Enterprise Partnerships (LEPs) responsibility for local economic plans. They should then be able to compete for a share of central government funding, distributed from a single funding 'pot', the report said.

Lord Heseltine's report makes 89 recommendations affecting industry, regulators and local and central government. He proposes closer relationships between the Government and the private sector, complete with an increased role for chambers of commerce, and changes to the regulatory and planning regimes.

"Successive governments have failed to set out a comprehensive long-term implementation strategy to turn thought into practice," Heseltine said. "My recommendations do not single out a few headline proposals for areas we need to improve on. What we need is a new partnership between the private and public sectors, between local communities and central government. Only in this way will we get the best use of our limited public funds and leverage in private investment."

The report calls on the Government to set out a clear, comprehensive national growth strategy which sets out the roles that should be played by central and local leaders. It should also set up a National Growth Council, to be chaired by the Prime Minister, which would be tasked with holding individual Government departments to account for their role in supporting national growth through major infrastructure projects such as roads, airports and energy networks.

He called for a greater role to be played by LEPs, the local government initiative launched by the Government in 2010 to help deliver economic growth and decentralisation. LEPs consist of partnerships between local authorities, businesses and other stakeholders and there are currently 39 such partnerships across England. The report recommends that LEPs  be allowed to develop "tailored local economic plans" covering skills, local infrastructure, employment support, housing, business support services and innovation. From 2015-16, central public spending allocated to these initiatives should be collated into a single national pot to support growth over a five-year period.

Local government and infrastructure law expert Alan Aisbett of Pinsent Masons, the law firm behind Out-Law.com, said that the review echoed the conclusions reached by bodies such as the Confederation of British Industry (CBI),  the British Property Federation (BPF) and the Local Government Association (LGA) in their own recent reports into economic growth. All had indicated that cities and other regional economic areas were the best people to determine the best way to achieve economic growth in their own areas, he said.

"To achieve this, local authorities and their partners in LEPs need three things: the organisation, standing and funding for LEPs for them to make a real difference; finance for investment; and the capacity, capability and know-how to convert policy statements into 'shovels in the ground'," he said. "Whilst the Government is not awash with funds to lavish on LEPs there are resources in local assets and revenues which can be harnessed to good effect."

In particular, Heseltine's conclusion that funding for local areas should be provided as a "single pot" rather than in the form of "parcels of cash attached to specific projects" reflected the local investment fund concept introduced as part of the Government's recently-announced programme of 'City Deals', he said. "This could become a flexible and sharp tool to stimulate investment," he said. City Deals are tailored agreements entered into between the Government and some of England's largest cities granting those places greater powers over local budgets and economic growth.

"Capacity and capability of the LEPs is not addressed in great detail but one suggestion may be to establish an economic growth taskforce from public and private secondees to help LEPs to develop some of the technical tools and avoid reinventing the wheel," he added.

A recent report by The Work Foundation, an independent business think tank based at Lancaster University, makes it clear that LEPs need to be given more power quickly or risk losing business engagement. A number of business partners interviewed anonymously for the report expressed "acute frustration at the slow progress" that their LEP has made to date. In some cases, businesses warned that they planned to critically review their involvement within the next six months if there was no change.

"While the evidence for what drives businesses to get involved in LEPs is mixed, the attitude of LEP business members to their prospects for their staying engaged in the long-term were quite clear," the report said. "They were aptly summarised by one business leader who said 'if this becomes a talking shop – if we aren't delivering real action on the ground for local businesses – I will walk away'. This view was expressed in every single interview."

Responding to the Heseltine report on behalf of the Government, Business Secretary Vince Cable said that it raised "a number of important and cross-cutting issues", particularly regarding the relationship between Government and business.

"A few weeks ago, I set out my own plans for a long term industrial strategy, based on government and industry working together in partnership in those areas where we can be world leaders," he said. "Lord Heseltine's findings show where government can improve its performance in delivering better interventions. We will now need time to consider its numerous recommendations and will respond in the coming months."