Oxfordshire is well placed to set the pace as a coherent stand alone partnership.

The current thinking about LEPs – what we know, questions to be answered and what it means for Oxfordshire are set out below.

The timescale is tight – although the official deadline is early September it is likely that early consideration will be given to proposals submitted before the end of July.

The next few weeks may well prove to be pivotal in ensuring that Oxfordshire has the opportunity to take control of its economic destiny,

By working together, local authorities, business organisations, local employers and education providers can produce a strong bid to form a Local Enterprise Partnership based on the foundations laid by OEP and the Oxfordshire Learning and Skills Partnership (OLSP).

Background

Last month Deputy Prime Minister Nick Clegg launched a £1 billion Regional Growth Fund to help areas and communities at risk of being particularly affected by public spending cuts.

The fund, which will operate from 2011 to 2013, will help areas most dependent on public sector employment as the country makes the transition to private sector-led growth and prosperity. Both private bodies and public-private partnerships will be able to bid for funding by demonstrating that their proposal will bring in private investment and support sustainable increases in private sector jobs and growth in their area.

In the same speech, Nick Clegg also set out plans for local enterprise partnerships (LEPs) that will bring together councils and business on an equal footing with one voice, replacing the current Regional Development Agencies (RDAs).

In a joint letter sent to council and business leaders, Business Secretary Vince Cable and Communities Secretary Eric Pickles have formally invited them to consider forming new Local Enterprise Partnerships that can provide strategic leadership and create the right environment for business success and economic growth. To a large extent this will replace the role that is currently undertaken by the Regional Development Agencies (RDAs), many of which will cease to exist during the course of 2011.

Local enterprise partnerships will tackle issues including planning and housing, local transport and infrastructure, employment, enterprise and support for business start-ups. Other roles currently carried out by RDAs, such as inward investment, sector leadership, business support, innovation and access to finance, will be led nationally,

The partnerships, which were originally designed to be local government-led, will now be chaired by a local business leader. This is perhaps a sign that the government wants to placate local business organisations which have expressed strong doubts about letting local authorities take sole responsibility for economic development.

What do we already know about LEPs?

The coalition agreement says that LEPs will be:

“joint local authority-business bodies brought forward by local authorities themselves to promote local economic development”

Legislation to enable the creation of LEPs will be included in the Devolution and Localism Bill, which was announced in the Queen’s Speech and is scheduled to be introduced to Parliament in the autumn.

The new Government has not provided any further detail on what LEPs might look like – the most in-depth account of how LEPs might function was given before the election in a letter jointly written by Caroline Spelman and Ken Clarke in March, when the two senior Tories were shadow communities and business secretaries. The letter said that businesses and councils will be able to come forward with proposals for new LEPs to replace RDAs. The boundaries of the partnerships will “reflect natural economic areas”, the letter said. It added that, if local authorities and businesses in a region decide that the current regional boundary reflects their local economic area and decide to form a regionally-based LEP, the Government would respect this view. It also said that at least 50 per cent of the boards of the new partnerships will be representatives from local commerce and industry and that a leading local business person will chair each LEP.

On funding, the letter said that the transition to LEPs would be “smooth”, and would allow for “the appropriate fulfilment of ongoing projects, grants and contracts, including projects which also draw on EU structural funds”. It is important to stress here that Spelman and Clarke are in different roles in the new coalition government (Spelman is environment secretary, while Clarke is justice secretary), so this letter may not necessarily reflect the Government’s policy.

It appears much of the thinking regarding these partnerships is still developing. Messrs Pickles and Cable seem to have differing views; Given other statements regarding regional development it is clear that London and the South East will lose out in favour of the North and that there is a rather confused view of what the words ‘local’, ‘enterprise’ and  ’partnership’ mean when combined in a name.

What will be the role of a LEP?

Local enterprise partnerships will provide the strategic leadership in their areas to:

• set out local economic priorities;
• establish a clear vision for local economic renewal;
• rebalance the local economy towards the private sector;
• create the right environment for business and growth in their areas, by tackling issues such as planning and housing, local transport and infrastructure priorities, employment and enterprise and the transition to the low carbon economy.
• support small business start-ups;
• work closely with universities and further education colleges, in view of their importance to local economies, and with other relevant stakeholders;
• promote tourism as an important economic driver.

LEPs will have a broader role than the RDAs they are replacing, including identifying barriers to economic growth in:

• Transport (delivery and influence);
• Infrastructure (delivery and influence);
• Planning (delivery and influence);
• Skills (advocacy and influence role).

Governance

To be effective partnerships, the Government believes that it is vital that business and civic leaders work together with an equal input from local government, local business and the major academic players. To this end they are suggesting that there is an equal representation on the boards of these partnerships which should be chaired by a prominent local business leader.

The Confederation of British Industry (CBI) supports the principle of equality between businesses and local authorities and has said that partnerships must be sure to follow a “practical, business-like agenda”

The governance structures will need to be sufficiently robust and clear to ensure proper accountability for delivery by partnerships.

The Institute of Directors (IoD) has gone further by suggesting that business should have more votes than local authorities on the ‘board’ – for example, at least 51% to 49% representation or a casting vote on a 50/50 basis. They have also called for ‘real business’ membership, selected by businesses rather than through the public appointment process with a standing representation of the IoD or a rotation of business organisation representatives on the ‘board’.

Size

One of the biggest questions to answer about the new LEPs is how big will they be? As they are replacing RDAs it would be natural to suspect that they should align to the same geographic region. However, the Government has made it clear that they are concerned that some local and regional boundaries do not reflect functional economic areas and that they wish to enable partnerships to better reflect the natural economic geography of the areas they serve and hence to cover real functional economic and travel to work areas.

To be sufficiently strategic, there is an expectation that partnerships would include groups of upper tier authorities – in other words that they would be larger than a single county. But the Government has also said that it would consider a county-based LEP proposal providing it genuinely represented a functional economic area in its own right.

Early statements suggested there would be 30 LEPs across the country but there is now some belief that this figure will grow

Funding

Given that the Government is now asking its departments to prepare scenarios for a 40% cut in spending and that David Cameron has previously stated that regional development will be focused in the North it is quite likely that LEPs in the South will be getting little, if any, money to spend in addition to existing local authority budgets for economic development.

There is a slight possibility of retaining some of SEEDA’s current resources in the short term but the view from Vince Cable and others is that the South East economy will manage well without any significant support or funding.

The IoD are adamant that there must be no attempt to re-localise business rates or in any way use the LEP framework to unilaterally strengthen local authority power over business issues.

The IoD would like to see pressure from LEPs on the Government to re-evaluate the workings of Business Rate Supplements and other issues on the basis of a coherent sub-regional economic development agenda. This is in contrast to the previous LABGI scheme whereby a proportion of the business rates collected by a local authority was handed back to them on the basis of economic growth but was not ring-fenced and so in many instances was not used to promote further economic development.

Membership

Whilst guidance on the makeup of the LEP board has been clear nothing has been said about how the partnerships will engage with local businesses. It is obvious that organisations such as IoD, CBI, FSB and the Town Chambers would be welcomed to the table but there is a need for a model that directly engages with representatives of the real economy and not other proxies for business.

To be successful, LEPs should be looking for commitment from major employers from all sectors in a model that allows for a strategic role with a light touch and no heavy diary demands.

On academic engagement with the HE and FE sectors it is important to obtain high level engagement at Vice-Chancellor and College Principal level.

One model that can successfully bring together local authorities, business and academia is a not-for-profit membership organisation.

What are the unanswered questions about LEPs?

There is a lack of detail about funding, remit and governance set-up for LEPs. The absence of such detail is in part because there remains a clash between two visions within the Government about how to proceed. Communities and Local Government (under Eric Pickles) want to allow local authorities to have a high level of control, but to allow variation in the model. The department for Business, Innovation and Skills on the other hand, unsurprisingly are championing a business voice and a higher level of clarity about role and remit.

Key questions remain over the transitional process from RDAs to LEPs. At the moment, it is not clear what the process will be for local authorities to decide to replace their RDA with a LEP, or who will be responsible for making the final decision. It is also unclear how soon local authorities will be able to come forward with proposals to establish LEPs, or how quickly LEPs can be formally established once they get the go-ahead. One suggestion is that the timescale for the transition will be two years.

Another unknown is how easy it will be to dismantle RDAs in areas where local authorities choose to set up a LEP that does not reflect the boundaries of their RDA. The RDAs own land and buildings and in many cases have long-term contracts with other organisations – both public and private. Quite how easy it will be to dismantle these arrangements is unclear. One possibility that has been mooted is that, should RDAs be replaced, residual bodies may remain in place for years to come. The Commission for the New Towns, for example, was not formally dissolved until 1 April 2009.

Next, there are also big questions over the funding and powers that the LEPs will have. RDAs will be stripped of their planning powers as part of the coalition government’s move to abolish regional spatial strategies but it is unclear what will happen to other key areas of the RDAs’ work, such as business support and development.

One key area of uncertainty relates to European Regional Development Funds which are currently administered by the RDAs. There are doubts over whether local authorities would have the capacity to administer this funding (which comes with a big bureaucratic burden attached) and, as RDAs are a key match funder of EU regional aid, there are concerns that structural funding may be returned to Brussels unspent.

The European Commission is uneasy about the prospect of the RDAs being replaced, fearing disruption and a loss of expertise in handling ERDF money

These are just some of the questions raised by regeneration professionals regarding LEPs. One thing that is clear, given the public spending squeeze and last week’s announcement of nearly £300 million of budget cuts for RDAs in this financial year, is that the new LEPs will have less money to play with.

There is also the question of what will happen if following a change of political leadership one or more local authorities wish to opt-in or out of a LEP.

Timescale

The Cable Pickles letter has asked for outline proposals from partnerships of local authorities and businesses as soon as possible, and no later than 6 September 2010. There is therefore some real urgency around organising a local LEP bid:

Although there is a formal deadline of early September, advice from political sources suggests that aspirant LEPs should be aiming to make a submission before the end of July 2010 – this will inevitably be before publication of the Government’s White Paper due to be published later in the summer, which will set out their approach to sub-national growth.

What does this mean for Oxfordshire?

LEPs will replace the role that is currently undertaken by SEEDA, the South East Regional Development Agency which will cease to exist during the course of 2011.

The recession and the credit crunch have had a significant negative impact on economic growth in Oxfordshire. Unemployment has risen and government spending cuts will inevitably lead to the fulfilment of the ‘double-dip’ prophecy.

SEEDA has had sizable budget cuts this year and will cease to exist sometime next year. The Business Link contract, which has only recently been re-negotiated at a regional level is now likely to be changed again to a national level.

The Oxfordshire Innovation and Growth Team, which has started to work effectively with high growth businesses in the county is facing severe budget cuts and the business mentoring services offered by OBE have only just managed to secure enough funding for another two years.

In this new world of austerity where businesses are being asked to do more with less it is essential that the public and private sectors work together to secure an effective local economic partnership to drive economic growth and achieve our shared vision that Oxfordshire should become a World Class Economy.

There are challenges to face in putting together a successful partnership bid, not least of which is the one of size. Indications are that a LEP should probably include more than one upper tier authority. However there is strong evidence to suggest that Oxfordshire, more than any of its geographical neighbours, does form a coherent economic geography.

Oxfordshire has tremendous assets – a highly skilled workforce, two internationally recognised Universities, a global brand in Oxford and four major science installations – more than any other county in England.

It is vital to our future economic success that the 5 local MPs, the County Council, the 5 District Councils, OEP, OBE, OxIGT, IoD, CBI, FSB, OTCN, the Chambers of Commerce and local business leaders work together to produce a convincing argument for the establishment of a Local Enterprise Partnership for Oxfordshire.

Conclusion

Creating an Oxfordshire Enterprise Partnership could be as simple as changing the word ‘economic’ in Oxfordshire Economic Partnership to ‘enterprise’ since OEP already has the governance structure, strategic economic agenda and engagement with local businesses that is required for a successful LEP.

Alternatively the local authorities may wish to create a new structure in parallel to OEP which replicates much of what the current organisation is presently engaged in. This would seem to be a misuse of scarce resources at a time when we can ill afford it with little gain by way of a more effective body for co-ordinated economic development in the county.

Either way it is vitally important that businesses – the organisations that generate the county’s wealth should be heard and should be allowed to express their views as to the best way forward.