City deals, LEP growth strategies, and whole place community budgets – choosing the best routes to economic success!

Government’s approach to devolution and decentralisation to enable local growth sometimes seems like that old joke about buses – you wait forever and then three come along at once.

With the announcement of wave two city deals today, government now claims that wave one and two deals may cover 71% of England’s population and 68% of jobs within the next twelve months (actually well over 80% of population and jobs if one excludes London).

Similarly, within the next twelve months, all 39 LEPs are likely to produce local growth strategies and business plans. These will provide the foundations for bids into Government’s ‘single economic pot’ to be established following the spending review this year, drawing on the recommendations of the Heseltine ‘No stone unturned…’report.

Completing the trio, local government awaits imminent responses to the whole place community budget pilot business cases produced in October. Each pilot highlighted work, skills and economic opportunity as part of the community budget. The expectation is that Government will offer significant parts of this agenda across local authorities as they look for savings and efficiency improvements in 2014/15 and beyond.

Each of these tools make considerable demands on local leadership teams, their organisations, and, to be fair, on government. With so much capacity taken out of our sector by public austerity, choosing the right bus to ride, and/or the order in which to take them, is an important challenge as places seek to unlock growth and development in an essentially flat-lining national economy.

The city deal ‘bus’ comes out of the Cabinet Office Cities Policy Unit depot, and is closely associated with Greg Clark, Minister for Cities, and Financial Secretary in the Treasury. As such wave one deals introduced a number of innovative financing mechanisms for resourcing and enabling growth investments – ‘earnback’, TIF, single pot(s) etc; together with decentralisation and greater city influence over national transport, housing, skills, employment and enterprise programmes. Wave two deals may add up to twenty areas – each focusing on a ‘bespoke’ distinctive proposition. It will also define a ‘core package’ available to all city deal geographies. It is not yet known whether there will be a third wave of deal invitations to the remaining 15-20% of England outside London, or indeed to London itself.

The LEP growth strategies were announced in the autumn statement by the chancellor, but this ‘bus’ probably comes principally out of the BIS depot, championed by Vince Cable. Heseltine’s report had identified a potential single economic pot of resources worth up to £12bn.p.a. In his autumn statement, the Chancellor promised a growth pot based on this report. Precise components, including housing, transport, skills and employability elements are to be determined in the spending review conducted in the first half of 2013. This growth funding will be available from April 2015.

Bidding into this pot will be open to LEPs on the basis of local growth plans they need to produce in consultation with business and public partners. They will also have access (more swiftly) to up to £1.5bn of infrastructure funding at a highly concessionary public work loans rate, ‘strategic oversight’ of a further £1bn of local economic funding to 2015 (including, although this is not made explicit, an additional £350m of RGF), and the opportunity to align the next EU round of Common Strategic Framework funds (i.e. ERDF, ESF etc) with their growth plans. With the expected leverage of local and market sources, the LEP growth strategy and business plan, therefore, represents a powerful instrument – covering similar ground to some/much of the city deal agendas.

The third ‘bus’ – whole place community budgets – comes principally out of the CLG depot (with a genesis under this government tending towards tackling ‘troubled families’). It largely follows a revenue expenditure route, rather than the capital focus of city deals and LEP growth strategies.

Four pilots – Cheshire West and Chester, Greater Manchester, Essex, and West London (tri-borough of Westminster, Hammersmith and Fulham, Kensington and Chelsea LA areas) – submitted business cases in October 2012 and each of them include significant economic ambitions. Further work commissioned by the Local Government Association (LGA) scaled up the business cases of the four pilots to application across England. For work and skills this suggested annual net benefits to government of £1bn – £1.7bn.p.a., mainly through reduced benefits payments to workless households and individuals. It also recognised but did not quantify additional benefits through increased local growth. This bus is certainly of a scale similar to the costs and benefits of city deals and could become the revenue accompaniment to bids into a capital pot from a LEP growth strategy.

As can be seen, three buses each come from different depots, with distinctive timetables, offering concessions to differing types of customer, and aiming to reach diverse destinations. The dilemma for local leadership teams, I suspect, is that, ideally, they have a legitimate interest in riding all three.

City leadership teams want and need the closer bilateral relationships with government that a city deal can provide now. They will also benefit from branding and positioning that a high profile city agenda across a functional economic area (FEA) can provide in national and global markets, and the stimulus to develop and deploy innovative approaches to growth that a city deal can incentivise.

LEP leadership teams want a compelling growth strategy and business plan that will position them to access public investment from the post-2015 single economic pot, and provide a foundation for 2014-20 EU funding programmes. And most local authorities want powers and influence to tackle deprivation through employment and skills interventions that reduce long-term dependency on public ‘remedial’ expenditure and costs of ‘failure’ – ideally as part of a whole public services approach to expenditure (and reform) in their area.

To date, only Greater Manchester Combined Authority (GMCA) has put itself in the position where it has both a city deal and is a community budget pilot, on a geography that is consistent with its LEP. Arguably, only London and perhaps GMCA have fundamentals already in place to take full advantage of the rather chaotic approach to local economic leadership emanating from the coalition.

If LEPs, LAs and our partners really want to test government’s commitment to meaningful devolution and decentralisation we need to collaborate on agendas to:-

• Build the cohesion and legitimacy of local leadership team(s);
• Align multi-level governance sub-nationally (i.e. LEP, city-region/FEA, LA), sharing understandings, goals and strategic priorities across all three levels;
• Use national opportunities in tandem and synergistically;
• Streamline and rationalise resources and decision-making; and
• Promote/incentivise entrepreneurial innovative cultures in public leadership – drawing together the best of public , private and third sector practice

We should collectively offer government ‘co-production’ of these agendas, but on equal terms – rather than playing the competitive selective games of which they seem so fond. In 2010-12 government tried to establish a new fleet of buses to achieve their ambitions for cities and communities. For 2013-15 they will desperately need our driving and fleet management skills if we are to reach a sensible set of destinations.