Government to announce which regions will benefit from Local Growth Fund

Labour and the Conservatives are focusing on regional economies - and they've come out with very similar policies

Labour peer Lord Adonis
Labour peer Lord Adonis

The question of how to create jobs in the regions like the North East is set to be top of the political agenda for the third week in a row.

We’ve had George Osborne, the Chancellor, proposing a new high speed rail line to link the North. Mr Osborne also called for the creation of combined authorities – bringing together major cities with nearby cities and towns – to be led by a mayor.

Then, Labour leader Ed Miliband announced his party’s plans to devolve funding to the regions.

And now we’re about to hear from the Government again, as Ministers announce the winners of the first round of bidding for the £2bn-a-year Local Growth Fund.

This is cash diverted from Whitehall departments and distributed directly to local councils and Local Enterprise Partnerships (LEPs), the economic development agencies led by industry, to spend on projects which will create jobs.

In fact, word is that everyone is a winner, as every LEP will get something – but probably less than they asked for. So the question is how much each region will receive.

In all of this, one thing has become clear. A consensus has emerged over how regional governance and economic development should be reformed, with both major parties adopting very similar policies.

In fact, even the approach towards developing those policies has been similar.

The Conservatives roped in Tory peer Lord Heseltine, a former Deputy Prime Minister, to draw up ideas for helping the major cities and regions. His report, No Stone Unturned, was published in 2012.

David Jones/PA Wire Lord Heseltine, who has said the Government should have greater powers to intervene when UK companies are targeted for takeover by foreign firms
Lord Heseltine, who has said the Government should have greater powers to intervene when UK companies are targeted for takeover by foreign firms

Labour also asked a peer, Lord Adonis, to come up with their proposals, and his report was published last month.

The two men both have a reputation for taking an interest in the “great cities” – the major cities outside London – and regional economies.

And they’re not a million miles apart politically, although both are arguably out of step with their own parties. Heseltine is a One Nation, pro-European Tory while Lord Adonis, a former SDP member, is seen as a Blairite.

As well as producing national reports for their party leaders, they’ve both been involved in supporting specific regions.

Lord Heseltine led a three month inquiry into the West Midlands economy, on behalf of the Greater Birmingham and Solihull LEP, while Lord Adonis led the North East Independent Economic Review on behalf of the North East LEP.

Both parties want to encourage the creation of more “combined authorities”, which involve neighbouring councils joining forces to create new, overarching bodies typically responsible for transport and

major infrastructure schemes.

But they don’t want to force these structures on regions. So instead, they are offering inducements.

Labour is offering combined authorities the power to retain increases in business rates resulting from economic growth.

The Conservative offer is less clear, but the Chancellor is promising “serious devolution of powers and budgets” to combined authorities.

This is great news for places that already have combined authorities, such as the North East, West Yorkshire, South Yorkshire, Merseyside and Greater Manchester.

Other regions, such as the West Midlands, are struggling to catch up - and could risk losing out on funding if local councils can’t come to an agreement.

But the Conservative plans contain a catch. George Osborne stated clearly that he wants to pump funding into combined authorities which have elected mayors.

Lord Adonis also wants combined authorities to create mayors, but this appears to be a personal view for now and not Labour policy.

Both parties are also moving to a system in which Government makes a “single pot” of money available. LEPs will draw up plans in partnership with their local councils or combined authorities to claim a share.

Conservatives currently promise £2bn a year, although they hint that this figure could increase. Labour have trumped that by offering £6bn a year (probably to the chagrin of Lord Heseltine, who came up with the idea).

Under the Conservative plan, LEPs compete for cash and the best bids might get the most money.

Labour says each LEP will be entitled to a fixed share of the cash - but they still need to draw up plans which convince Ministers they will spend it wisely.

What’s not clear is what happens to all the other schemes currently in place to support economic growth, such as city deals and the regional growth fund. However, the implication of a “single pot” is surely that they will be wound down.

So this is what the future holds. LEPs, created by the Coalition government, are here to stay.

And there will be no return to the days of regional assemblies or the other regional structures backed by the last Labour government.

Instead, economic development will revolve around combined authorities - led, if Mr Osborne or Lord Adonis get their way, by mayors.

Journalists

David Whetstone
Culture Editor
Graeme Whitfield
Business Editor
Mark Douglas
Newcastle United Editor
Stuart Rayner
Sports Writer