The Institute’s director, Paul Hackett, wrote for Public Finance on the possible future of LEPs after the publicationof our report Making local economies matter
It is almost four years since the coalition government announced it would axe Labour’s regional development agencies. David Cameron labelled them a ‘disaster’. Other Conservative ministers waded in, claiming the RDAs were pointless quangos that had failed to revive the regions.
Although the LibDems’ Vince Cable remarked that the RDA cull was a ‘little Maoist and chaotic’, the coalition continued to argue that economic rebalancing would be better served by establishing a network of local enterprise partnerships and enterprise zones.
Leaving aside the fact that the total bill for abolishing the RDAs is now estimated at over £1.4bn and that it took nearly two years to set up the 39 LEPs, what does the coalition’s score card look like on regional growth and the LEPs?
According to the Smith Institute’s latest report, Making local economies matter, written by John Healey (Labour’s former housing minister) and Les Newby (former director of the Yorkshire RDA), the RDAs were a lot more successful than the government claimed. Indeed, the report’s detailed audit of the RDAs concludes that they stand up well against the LEPs that replaced them.
It reveals that from 2000 to 2010 the poorer English regions were able to achieve almost the same rate of gross value added growth as the prosperous regions, but since 2010 the data shows that the growth rates are 88% higher in London and the Greater South East.
In a joint foreword to the report, shadow chancellor Ed Balls and former minister Lord Adonis point out that the funding for LEPs is far more limited than what was available to the RDAs, and is also more constrained by Whitehall. They also comment that LEPs are too weak to make a difference and lack proper accountability.
While highlighting the RDAs’ successes, Balls, Adonis and Healey argue that there is no turning back. The report calls for evolution, not revolution, and says that rather than sweeping away the current structures a new government should create a smaller number of larger LEPs, improve accountability, grant them extra powers and a bigger single pot of funds.
The Smith Institute report suggests Labour is in no mood for vindictive policy-making and has little appetite for reinventing the wheel. Perhaps more importantly Balls and his shadow Treasury team are concerned that the wealth gap within and between regions is getting worse and that any serious commitment to a balanced economy requires a radical and accelerated devolution of powers.
Healey says a big part of the answer is to turn the LEPs from featherweights to heavyweights, with extra powers over skills, innovation, jobs programmes, export support and new business investment. Adonis’s Growth Review, to be presented to Labour leader Ed Miliband in June, is also expected to recommend bigger and bolder LEPs.
Reinventing the RDAs through a revamped and super-charged LEP network, with stronger economic leadership and better partnership working with business and local authorities, is looking like Labour’s response to the growing regional divide.
However, the key to future success will arguably lie more with the funding than the governance. There will, of course, be opposition to any streamlining of LEPs, but there will be howls of protest if their future budgets continue to fall well short of what is needed. As Healey’s report suggests, rebalancing the economy has to be made a priority and can’t be achieved on the cheap.
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