As local government undergoes its biggest shake up in decades, the people and projects which rely on regional funding are starting to ask some big questions. Olivia Gagan reports.
Last autumn’s Comprehensive Spending Review made for some unpleasant reading for backers of regional infrastructure projects, and the assortment of development agencies, councils, local stakeholders, businesses and charities that support them.
South East England is no exception. As a major economic powerhouse for the UK, the region has the largest number of businesses of any region in the UK. Financial and business services account for almost a third of output and a quarter of employment. Alongside a wealthy business core clustered around the edges of London, 80% of the region is classified as rural. As a result, the south east is the 31st largest economy in the world. Infrastructure based here - Thames Gateway, Reading railway station, Gatwick airport - have national and international importance.
With the coalition government pushing for new growth, while pruning back - or some might say, slashing - budgets, money will be a major challenge facing the region over the upcoming year. Balancing the need to pay off public sector debt with the desire for continued investment in the region’s population of 8M people is key.
“Those who delivered projects effectively before will still be able to gain funding for projects”
Scott Witchalls, Peter Brett Associates
But there is an even more fundamental issue to be faced. The government has outlined a new plan for the way the country’s regional affairs are to run. The move towards devolved powers was laid out in its Local Growth White Paper, which set out elements of the Localism Bill which is due to come into force next year. There are to be radical changes in the way local growth is created, with the aim, as deputy prime minister Nick Clegg said at the time, of “bringing together local business and civic leaders to set the strategy and take the decisions.”
As part of this move to end what Clegg calls “the culture of ‘Whitehall knows best’”, the eight English regional development agencies (RDAs), including the South East England Development Agency (Seeda), are to be abolished. All future regional economic development is to be undertaken by the new Local Enterprise Partnerships (LEPs), which will comprise local businesses, stakeholders and councils. Unlike the RDAs, these new partnerships will receive next to no money from central government.
This will, of course, mean big savings for Whitehall; it is estimated that £2.3bn was invested in RDAs in 2009-2010. In 2009-10, Seeda had a £166M budget. For 2011-12, it was slashed to £37.5M. This represents a 71% drop in funding for the region’s businesses and infrastructure, and as it stands, it is unclear how the massive funding gap left by the abolition of RDAs will be filled. The government plans to establish a £1.4bn regional growth fund to help address the issue. This money, however, has to last three years and is spread across the whole of the country. South East England’s new group of seven LEPs has so far submitted 33 bids, worth £186M in total. So far, none have been approved. Add these funding issues to the abolition of one development mechanism and the transition process to another and it becomes clear that this is a time of great upheaval for the way the region’s current and future infrastructure will be planned and managed. All RDAs are to close by March 2012.
Seven news LEPs
Seeda is currently in the process of handing over its work to the seven new LEPs representing the region.
Usurping the existing RDA and providing a new rebooted way of boosting the south east’s development is no small task, and the spotlight will be on these new LEPs to deliver under their new responsibilities. Seeda has left an impressive legacy; it estimates that it has generated £5.60 for every pound it has spent between 2002 and 2007. It has also spearheaded some major projects, ranging from facilitating broadband access to saving Portsmouth naval base, safeguarding 17,000 jobs and £680M in contracts.
Quangos such as RDAs have come under fire over the past decade for the dizzying sums of money they consume. There are concerns, however, that in going from strong levels of investment to none, that regional growth will grind to an inevitable halt. Responsibility but not money is being given to local councils and stakeholders. The changes may go some way to appeasing taxpayer concerns that their cash has for too long been feeding large Whitehall-led organisations, but it still leaves the question: who is going to pay for development of the south east economy? Government would argue that it is time for local businesses to drive growth and procure funds. But without the support of central government-funded feasibility studies and a reliable flow of start-up funds to help get fledgling projects off the ground, it is uncertain how such resources will be raised and managed on a significant scale.
Larger than local
Another question that faces these new, highly localised partnerships is: what happens to larger-than-local projects?
The ICE has said previously that there are significant implications for the delivery of important infrastructure that sits between the national and very local level - to put it simply, with the focus on the small-scale, what happens to projects that straddle or encompass two or more administrative boundaries? With the move to devolving power to small councils and local businesses, there are concerns that projects necessary for larger groups of people than local communities, could fall foul of the new regulations. Chair of the ICE’s localism panel Geoff French says that while ICE recognises the need to devolve power, it remains concerned about certain aspects of the new approach.
Over the last six months, the ICE has campaigned for a duty to cooperate, which is intended to facilitate cooperation between planning authorities on infrastructure of strategic importance, to be strengthened and clarified.
Recent amendments made to the Localism Bill report stage addressed this, but French notes that it remains to be seen how it will play out in reality.
The ICE is also concerned about the introduction of local referendums, he says. “If organised community groups are able to oppose developments even before planning proposals have been made, this could pose questions for infrastructure development.” French adds that leveraging funding is always difficult, whatever system is in place.
“My view is that the public and private sectors are considerably closer under the LEPs than they were under the RDAs. This must improve the engagement with private investors.”
This time last year, now-deputy director for growth and infrastructure at Oxfordshire County Council Martin Tugwell was hopeful such radical changes could work.
“It seems like the right time to do this. If you give local councils the opportunity to make decisions, providing the information, the technical expertise and a framework is there, they’ll do it. It’s not going to make decision-making any easier, but is that such a bad thing?”
“If organised community groups can oppose development, this could pose questions for infrastructure”
Geoff French, ICE Localism Panel
Peter Brett Associates partner and regional investment expert Scott Witchalls thinks that the key challenge will be to understand and agree priorities for investment across the region.
“There will naturally be a lack of willingness to support a project if it might prejudice another bid for a project of more interest to them. However, this was always the case.
“The only real difference is that when funds are even more scarce, unequivocal support is much harder to gain. I’m convinced that those who approached the delivery of projects effectively before, will still be able to gain support and funding for projects.”
With the advent of the localism agenda, regional government is entering a period of unprecedented change. It is up to those on the front line at the regional level to ensure that questions are asked, and answers found.