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Government unveils new regional growth strategy

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The government has given the green light for an initial wave of 24 Local Enterprise Partnerships (LEPs).

The LEPs will form the foundations of the government’s new approach to supporting local and regional enterprise.

With Regional Development Agencies (RDAs) due to be phased out in England by 2012, the LEPs will bring together businesses and local authorities in an effort to set local economic development plans.

As part of the announcement of the White Paper on localised economic growth, the government also declared the £1.4 billion regional Growth Fund open for business. The new LEPS will be able to bid for finance from the fund, which can invest the money available to it in areas of the country most adversely affected by cuts in public spending during the next three years.

The White Paper detailed the government’s approach to encouraging sustainable growth and identified three key themes.

Shifting power to local communities and businesses through the LEPs; increasing confidence to invest by creating the right conditions for growth through a consistent framework for investment, an effective planning framework and new incentives to make sure local communities benefit from development; and tackling barriers to growth that the market will not address itself.

Vince Cable, the Business Secretary, said: “I was delighted that so many of the proposals for local enterprise partnerships showed real imagination and initiative and a genuine desire to drive local economic growth. I am pleased to announce that we are asking 24 of these partnerships to set up their boards and get to work.

“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 the 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.”

The government’s local growth plan contained details of a New Homes Bonus from April 2011 which will match fund the additional council tax raised for new homes for the following six years.

It also promised to look at: proposals that would allow local authorities to keep the business rates they collect; a new system of Tax Increment Financing (TIF), which will enable local authorities to borrow against future increases in business rate revenues; and a streamlined and planning system, which will give communities and neighbourhoods more power over decisions and increase investor certainty.

As well as RDAs, the Business Link network is to end in 2012 and is to be replaced by a website and call centre.

Following both will be the Grant for Business Investment scheme, which has provided £470 million in grants, supporting 2,300 businesses, helping to fund £4.2 billion of business investment and credited with creating 46,000 jobs.

A Business Department spokeswoman said: “The reason for cancelling it is down to the unprecedented problems with the public finances.”

The government described the £154 million cost of the Business Link network of offices as “high” and the “generalist nature” of the advice often “poorly targeted” towards “lifestyle businesses that have no aspiration to grow”.

Mark Prisk, the small business minister, said: “I have always taken the view that we need to modernise the system. We felt as we set out the winding down of the regional development agencies we needed to clarify the position on regional Business Links.”

The government believes that greater prioritisation of support is required, focusing only on those areas where it can really add value.

It said: “Businesses need to know how they will benefit from seeking external advice, especially strategic advice that has the potential to radically transform a business. They need to find the right advice quickly and be able take it up with confidence.”

The Business Department added it was also working with “organisations, business groups and banks” to create a national business mentoring scheme “to increase awareness and access to business-to-business mentoring”.

The White Paper received a broadly positive response from business.

Mike Cherry, policy chairman at the Federation of Small Businesses, said: “We are delighted that the first LEPs are beginning to take shape and it is right that those that are ready to do so are not held back.

“However, it is now vital that these LEPs follow through with their promise to include small firms in the proposals and turn it into a permanent relationship. If these partnerships are going to be successful then they must genuinely involve local businesses to get things done – not fall into the temptation of merely paying lip service to the small business sector.”

David Frost, the director general of the British Chambers of Commerce, applauded the initiative but argued that the plans only represent the start of change.

Mr Frost said: “Companies up and down the country are ready and willing to work with local councils to ensure that our towns and cities are open for business. In return for their time and energy, however, local businesses want to know exactly how the new Local Enterprise Partnerships will make it easier for them to tackle the problems with planning, skills and transport that stifle private sector growth.

“The White Paper is a good start – but it is only a start.  In order to keep business on board, LEPs will need to launch with a laser-beam focus on business growth – and concentrate on ‘getting the basics right’. This will give local business people greater confidence in their area, and the chance to invest and create jobs.”

Phil Orford, chief executive of the Forum of Private Business, looked ahead to the further development of the LEP programme.

He commented: “We welcome the fact that LEPs have been agreed upon for the main city regions and economic powerhouses. However, we now look forward to the focus being placed on other areas of economic need with advice from the Government to those who need to re-bid.

“We also believe that the £1.4 billion growth fund should be focused on the areas of greatest need and that innovative and transformational private sector bids for funding should be welcomed and encouraged.”

But Mr Orford expressed reservations about the possible abuse of tax increment financing by local councils: “We want to see continued fairness with local business taxation in order to foster business growth. With local authorities soon being able to borrow against future business rate increases, they may find it tempting to hike rates in order to borrow more, so this is certainly something which needs to be monitored and policed very closely.”

Local taxation was a point that concerned the CBI too.

John Cridland, the CBI’s deputy director general, said: “We are very concerned about the ambiguity raised around business rates in today’s announcement. If this means re-localising rates, the CBI is opposed to giving local authorities power to set these. Such a change would mean that businesses would face unknown varying levels of tax across the country. The CBI is determined to retain the nationally set Uniform Business Rate.”