I’ve been reflecting on the Government’s response to Heseltine overnight. While most commentators have reacted in a broadly positive way, as always, much depends on how policies are implemented and whether the rhetoric about the Government’s commitment to devolve is supported by day-to-day decision-making.
Key points worth noting:
Creation of Single Local Growth Fund: The details of what will be in the Fund are still being negotiated as part of the Spending Review, and we would expect this to be smaller than Lord Heseltine’s recommendation of £49bn. It is good news that transport, housing and elements of skills funding (though not yet apprenticeships) will be in the Fund, and it could be good news that they’ll be looking for “alignment” with other skills and employment programmes as well as EU Structural and Investment Funds, although ‘alignment’ is one of those words that can cover a multitude of policy responses...It will be important, however, that the perfectly sensible criteria for which monies to include in the Fund (on p.42) are not applied in such a way that, where evidence is limited as to what works best at national / local level, the default is to keep everything national.
Competition: There will be an element of competition, but perhaps not quite what Lord Heseltine envisaged. The response says that the Single Local Growth Fund will be allocated “through a process of negotiation and using competitive tension to strengthen incentives on LEPs and their partners to generate growth”. This means that every LEP will get something but the exact offer will depend on individual plans. A process similar to the Wave 2 City Deals approach may be used to strengthen the quality of multi-year strategic plans and bids to the Fund, with more available to those that “put forward robust and ambitious means of delivering economic growth plans”, demonstrate greater innovation, stronger capacity and stronger governance across the LEP area.
Capacity and Local Enterprise Partnerships: An approach based on competition raises questions, as always, about the places that have less effective LEPs and partnerships; the variability of LEPs around the UK is well documented. The response is clear that LEPs will be the main bodies through which funding is channelled, as for the Growing Places Fund, but that LEPs should remain “small, responsive, business-led organisations and avoid becoming local bureaucracies”. LEPs will get an additional £10m a year to boost their capacity and support development of strategic multi-year plans for local growth, and there will potentially be some support from Local Growth teams, but more detail is needed on whether government will provide different types of support to LEPs that are less developed, particularly in economic areas that are either particularly vulnerable or have particularly high growth potential.
Governance: It’s clear that the Government is pushing hard for local areas to improve their governance. Government has said it will support local authorities to form combined authorities or other forms of collaboration through a £9.2m Transformation Challenge Award, will not prevent areas pursuing unitary status, and will seek legislation for directly elected mayors for combined authorities where this is wanted by local areas. This is all very good news, particularly ‘conurbation mayors’ – the Centre has been calling for this since 2006, although we would want to see clear powers and funding attached to a directly elected mayor, to avoid the problems that the referenda last year ran into.
Getting Whitehall thinking locally: It is good that Local Growth teams are going to be established and that every LEP will have a senior Whitehall sponsor to work with them to understand their priorities and introduce more place-based thinking into Whitehall policy. However, to achieve the kind of transformation in policy making required to ensure that every national economic growth policy at least considers place when it is developed, this will need to go beyond senior sponsors having greater familiarity with one place. Instead the senior sponsors will need to challenge policies not just as champions for their LEPs, but on the basis that national policies work best if they are able to adapt to local circumstances.
Infrastructure and borrowing: It’s interesting that a new, concessionary Public Works Loan Board Rate will be available to an infrastructure project nominated by each LEP (except London), with the total borrowing capped at £1.5bn – and will be a good test of LEPs for them to have to put forward just one project to be considered. But will £1.5bn be enough – and will sharing it out between LEPs result in jam-spreading rather than prioritisation of the projects that could make the biggest difference to growth? Understanding the (national!) criteria for allocation of the borrowing will be important to ensure that this results in the boost to local growth intended.
Generally, there’s some good news in the response to Heseltine, not least because some of the measures are tackling the culture of centralisation as well as being specific policies to change allocation of powers and funding. But the proof is always in the implementation – and the money. Just as Heseltine’s approach was, the response from Government is still a relatively centralised approach to devolution and the real test will be whether this gets implemented in a way that really does cut through Whitehall silos, whether the pot is going to be big enough, and whether Government really does let go of some of its strings.
To help point the way forward, we have distilled the 81 recommendations that the Government has committed to at least partially implementing into the top ten priorities national and local policymakers now need to focus on, including establishing a significant Single Local Growth Fund, ensuring flexibility about the way funds are allocated, and building on some of the most useful aspects of City Deals such as the ability to negotiate, with constructive challenge from Government to help local areas improve their plans.
Heseltine is a real opportunity to make a difference to the UK economy; we need to do all we can to ensure it is implemented in a way that makes the most of that potential.