Boosting the north? Regional growth plan unveiled

By Peter Wozniak

The government is setting out the details of its plans to encourage regional development today.

Regional development agencies, set up under Labour in 1999, will be scrapped under the proposals and replaced with ‘local enterprise partnerships’ (LEPs).

Vince Cable has announced the move in parliament, while deputy prime minister Nick Clegg will later spell out the mooted regional growth fund, whereby local groups, including LEPs, will be able to bid for funding from a pot £1.4 billion.

Ministers argue the new system, involving close co-operation between local government and business organisations, will be more accountable, less remote and more efficient.

Mr Cable said: “The knowledge and expertise of the private sector, local authorities and their local communities will be crucial as we work to create a better environment for business and ensure that everyone has access to the opportunities that growth brings.

“The measures set out in today’s white paper demonstrate the coalition’s ambition to create a fairer and more balanced economy – one that is driven by private sector growth with business opportunities spread more evenly across the country and between industries.”

A total of 56 groups made bids to participate in LEPs. The business secretary revealed 24 have been successful.

Communities secretary Eric Pickles, upon whose department many of the new responsibilities will fall, added his support for the proposals, saying: “Our vision for local enterprise partnerships will help transform the economic geography of the country by creating a new local dynamism that will encourage economic growth and protect business with proper local accountability.”

Among the measures considered in the white paper are plans to match funding to council tax increases for new houses in the next six years. £200 million has been set aside for this ‘new homes plan’ next year.

Local councils will also be able to borrow against future increases in business rates revenue, to encourage inward investment.

The transfer of control to local government has however been criticised in some quarters, given the fact that councils are facing some of the heaviest cutbacks in the spending review announced last week.

Critics suggest that the new LEPs will simply be unable to provide the same level of service as the previous RDAs.

Labour reacted angrily to the proposals calling them a “fig leaf” for the impact of the spending review on the regions.

John Denham, the shadow business secretary, said: “Just when action to promote jobs and growth is essential, the Government has shown it has no real plan for regional growth.

“Regional funding has been by cut at least two-thirds, all key decisions are being centralised in Whitehall, the new Local Enterprise Partnerships are a shambles and leave areas of the country with no effective development organisation, and the voice of business is being ignored on everything from planning to investment and to skills.”

Some of the RDA functions will also be absorbed by central government departments, raising the prospect of job losses.

Under the plans, the LEPs will come into operation in 2012, though the prime minister has warned that the transition period must be delicately managed.

Meanwhile, the regional growth fund is designed to encourage private sector investment in those areas of the UK normally heavily reliant on the public sector, such as the north-east of England.

The plans form part of the government’s response to the criticism that those areas will be disproportionately hit by the cuts announced in the spending review.

Bids for the fund will begin being considered in January next year, by a board chaired by former deputy prime minister Michael Heseltine.

The government claims regional development funding will be better directed than in the past.

However, the relatively small size of the fund has led to further attacks, with critics saying it will make little difference in the wake of mass public sector job losses.

Mr Denham added: “The Regional Growth Fund is a pathetic fig leaf to cover the absence of any plan for growth.

“Regional funding has fallen from £1.4bn a year to £1.4bn over three years and is now expected to pay investment in transport and housing that previously enjoyed dedicated budgets.”