Authority Alert: A New Approach to Local Growth

The much-heralded White Paper on local growth has at last arrived. As most of its proposals have been drip-fed into the media over the past few months, it holds few surprises but it does provide some information on how the plans are to be put in place. Many questions, though, remain unanswered.

"Local growth: realising every place’s potential” sets out the Government’s role in empowering locally driven growth, encouraging business investment and promoting economic development. Its stated aim is to put businesses and local communities in charge of their own futures. It focuses on three key themes: 

• shifting power to local communities - through the abolition of RDAs and establishment of Local Enterprise Partnerships;
• increasing confidence to invest; and
• supporting investment in places and people to tackle the barriers to growth.

This Alert highlights the key issues in the White Paper and discusses the implications for local authorities.

Abolition of Regional Development Agencies

The Paper confirms that the forthcoming Public Bodies Bill will abolish the eight RDAs. Most of their functions will be devolved to the local level, although some, such as regional workforce skill strategies, will simply stop. RDAs are expected to complete the winding down of their activities by April 2012. The Paper sets out how their functions will transfer and the transition phase. RDAs need to review their current contractual commitments and seek to exit from projects by exercising break clauses or through renegotiation, 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.

Local Enterprise Partnerships

Local Enterprise Partnerships (LEPs) will replace RDAs, providing the clear vision and strategic leadership to drive sustainable private sector-led growth and job creation in their area. The Government particularly encourages partnerships working in respect to transport, housing and planning as part of an integrated approach to growth and infrastructure delivery.

Local areas will be able to decide on their own structure that best meets local circumstances and opportunities, although governance structures will need to be sufficiently robust and clear to ensure proper accountability for delivery. The constitution and legal status of each LEP will be a matter for the partners. However, it is expected that at least half the board members will come from business, and that the chair will be a prominent business leader or, in larger cities, the elected Mayor.

The paper details the 24 partnerships that have been given the go-ahead to establish their boards.

Increasing confidence to invest

 This will be achieved through:

• a new, simplified planning framework, with a national presumption in favour of sustainable development;
• new Right-to-Build powers, enabling local communities to build small-scale development without the need for a separate planning application; and
• a new statutory duty to cooperate on local authorities, public bodies and private bodies that are critical to plan-making.

There will also be incentives for local authorities to deliver sustainable economic development, including:

• the New Homes Bonus scheme, starting in 2011-12 and backed by £946m funding over four years;
• new Tax Increment Financing (TIF) powers that will enable councils to borrow against future additional uplift within their business rates base;
• local communities that host renewable energy projects will be rewarded by being allowed to keep the business rates they generate; and
• a Business Increase Bonus to reward those authorities where growth in the business rates yield exceeds a threshold, by allowing them to keep the increase, up to a certain level, for six years.
  

The Government is also considering other options to enable councils to retain locally-raised business rates. It will look at these, along with other radical ways of encouraging local economic growth, in a Local Government Resource Review to be launched in January 2011.

Focused investment

The Government will intervene and make strategic investments to tackle market failures. The key measure to achieve this is the Regional Growth Fund that was announced in the June 2010 Budget. The objectives of the Fund are to stimulate enterprise by providing support for plans and programmes, to create additional private sector employment, and to support areas in making the transition from being public sector dependent to private sector led growth.

The Regional Growth Fund is now open to bids from all areas (including social enterprises but excluding purely public sector bodies) and will close on 21 January 2011. Bids must demonstrate a compelling contribution to delivery of sustainable increases in private sector employment and economic growth and must meet detailed criteria. A second round will be announced in early 2011.

European funding

The Government is working on new delivery structures for the European Regional Development Fund (ERDF) that is currently delivered by the RDAs. It will also encourage alignment of the Regional Growth Fund with ERDF, where the aims of bids are eligible for support from both Funds. The new delivery structure will be announced at Budget 2011.

Implications for Local Authorities

The paper introduces some fundamental changes to the current landscape of sub regional growth, economic development delivery and planning. Although detail will follow in, for example, the Localism Bill (expected at the end of November) and the Local Government Resource Review (January 2011) there are already significant issues for authorities to digest and plan for. In particular:

• any contracts/arrangements with RDAs need immediate review given the RDA's focus on exit strategy;
• authorities in areas where a LEP has been agreed need to shape the nature of the body - Eric Pickles' vision of self forming, non statutory organisations has clearly won the day over Vince Cable's stated preference for statutory bodies. Whilst this gives freedom for local solutions to emerge, it raises some real challenges for governance, accountability and delivery;
• authorities in LEP free zones will need to be alert to the potential for missed opportunities - for example the first round of bids to the new Regional Growth Fund closes in January 2011. LEPs will be well placed to bid as no exclusively public sector bids will be considered; and
• the paper is stinging in its criticism of much of the current development control system  - "bureaucratic and expensive" ,"a barrier to development", "alienating communities". The paper signals some fundamental changes to the planning system which will see fast-track locally agreed schemes apparently by-passing the specific planning application process. Authorities need to start thinking now about how their organisation and decision making will need to adapt to these proposals.