We need to use the LEPs to generate funding

Local Enterprise Partnerships need greater powers to unlock infrastructure funding says Alex Thomson, Chief Executive, Localis.

With the budget under three weeks away, local authorities across the country are awaiting the government’s steer on the forthcoming financial landscape.

One area of the economy given particular prominence in the Chancellor’s Autumn Statement was the funding of infrastructure, and Localis will launch a major report ? Credit Where Credit’s Due produced in partnershp with Lloyds Banking Group ? on this very subject next Monday with speeches by Eric Pickles, Lord Shipley and Cllr Paul Carter.

As Jesse Norman points out in our foreword, the challenge is substantial ? ‘roads clogged with traffic, sluggish broadband connections, trains heaving with passengers, a national grid which lacks resilience?the danger is that these are what we bequeath to future generations.’

The government has indicated its desire to see œ250bn worth of infrastructure investment in the coming years, and this, in the present financial climate, will require some innovative thinking.

As the Autumn Statement made clear and our report explores, pension funds will have a large part to play. Yet driving investment in infrastructure will not just be through the use of such (in infrastructure terms, relatively) new sources of capital, but, equally, effective use of existing mechanisms.

As Jesse Norman notes, though finding capital for investment is certainly tough, ‘the answer lies in making better use of the weapons we have, and in being bold about adding to our armoury.’

One current ‘weapon’ which we believe can be used to real benefit are the 39 Local Enterprise Partnerships (LEPs), and in Credit Where Credit’s Due we advocate an extension of the powers they currently hold.

To date, LEPs have been given a limited range of powers ?assisting in the preparation of bids for Regional Growth Fund monies, bidding for an Enterprise Zone, and receiving a share of the œ450m Growing Places Fund to stimulate local capital projects in danger of collapse ? but, we argue, they could and should be given more to do.

The barrier busting ethos of the current government offers much hope, and LEPs should be bold in seeking more power.

This is because, we argue, LEPs provide a potential vehicle for a range of funding options due to enter the local government ‘armoury’.

With the Community Infrastructure Levy due to bring œ6-7bn into local authority budgets over the next decade, and a greater degree of business rate revenue to be retained locally, we believe that by pooling a small percentage of these monies through their LEP, authorities could achieve a great deal.

Whilst such a system should not be mandatory, a receipt pooling function for LEPs would build on successful examples of cross-authority collaboration (such as Manchester’s Transport Innovation Fund) and could deliver real economies of scale.

Receipt pooling aside, at present there is a danger of creating a ‘two-speed’ system of LEPs. 11 LEPs had bids to host an Enterprise Zone passed over in the August 2011 round of allocations ? thereby meaning that they lack the benefits- retention of all business rate growth for 25 years, faster broadband, and lower levels of planning regulation – an Enterprise Zone brings.

The government was understandably eager to ensure that competition between LEPs drove a higher standard of bid in apportioning the initial tranches, but it should also encourage those LEPs that failed in August to come forward again.

If LEPs are to have real teeth, Enterprise Zones will play a key role. Our report therefore argues that the government should announce its desire to see all LEPs contain an enterprise zone, and allow those LEPs currently without one to bid for such a scheme to commence in April 2014.

Should they prove successful in the coming years, we believe there is also much merit in the government announcing its intention to create a second round of enterprise zones in 2018.But can Enterprise Zones have another benefit ? what if they were not awarded but sold?

We suggest that the government consider empowering each LEP to auction the rights to an additional Enterprise Zone to the private sector(who would then receive all or, most likely, a significant percentage of the future business rates generated).

This would generate up-front monies for further capital investment, provide (if a percentage of rates were retained within the local authority) an additional localised stream over a 25 year period, and ensure that there was genuine private sector demand for said development since most of the risk would be outsourced to that very sphere.

With a budget deficit to clear and œ250bn worth of infrastructure to deliver, politicians both local and national will need to be creative in the ways they use existing mechanisms, and imaginative in adding to the range of funding options currently on offer.

Credit Where Credit’s Due, covering LEPs, Enterprise Zones and a whole host of other funding options, suggests some paths they might consider, and shows how local authorities and LEPs can help deliver a bottom-up form of growth providing jobs in the short to medium term, and a more balanced economy in future years.

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