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Government auditors ask difficult questions about local enterprise partnerships

Government auditors ask difficult questions about local enterprise partnerships

🕔10.Aug 2015

It could take years to determine whether Local Enterprise Partnerships are providing value for money and really stimulating economic growth, the National Audit Office has warned.

The NAO’s latest report puts further pressure on Ministers to simplify and make more accountable a complex web of regeneration schemes which include the £2 billion Regional Growth Fund, City Deals, Growing Places funds and enterprise zones with finance-generating business rates retention schemes.

NAO, which has been critical in the past of the Government’s “slow start” in getting the 39 LEPs off the ground and the lack of public accountability of the growth schemes, says the true test of the local enterprise partnerships will come when the bodies start to spend large sums of money.

The report warns:

The impact of economic policies will play out over several years.

For example, the effects of reforms to local authority financing, such as business rates retention, including the impact on output measures such as Gross Domestic Product and Gross Value Added, may not be fully seen for several years.

The NAO says it will not be easy to decide the extent to which the private-public sector LEPs have contributed to economic recovery in the regions, and whether an uplift would have happened anyway.

It will be difficult to define and measure impact, and assess what works, due to the multiple factors and programmes influencing economic growth.

The latest analysis reaffirms a significant fall in Government economic investment following abolition of the Regional Development Agencies following the 2010 General Election.

RDA spending ran at just under £2.5 billion a year between 2006-06 and 2009-10. Schemes put forward by LEPs and given approval amounted to £800,000 in 2013-14 and £1.7 billion in 2014-15.

The NAO report is published as questions continue to be asked about the performance of the Government’s flagship job creation programme.

Answers to parliamentary questions from Shadow Business Secretary Chuka Umunna show the Department for Business, Innovation and Skills cannot properly account for money given to 138 different projects that signed up to the Regional Growth Fund but then withdrew.

Mr Umunna said the admission was “very worrying” and another example of “chaos and delay” in the system.

In a critical report last year the NAO urged the Government to make RGF schemes more cost effective. Some of the approved bids had a cost-benefit analysis of less than 2:1, which is below Treasury value for money recommendations.

The average cost of each net additional job created increased substantially in the third and fourth RGF bidding rounds to an estimated £52,300 per job compared with £30,400 in the first round, £33,500 in the second, and £39,700 in the third.

NAO warned:

Looking ahead, there is still a significant amount of public money to allocate through the fund. As well as the £600 million allocated to rounds five and six, at least £136 million is available from projects that have now withdrawn from earlier rounds.

Our review indicates that value for money depends on the Departments further tightening controls on the jobs and other benefits that bids offer, relative to their cost.

Making a success of the Regional Growth Fund and its successor the Local Growth Fund (LGF) represents make or break time for the Greater Birmingham and Solihull LEP, whose economic strategy relies to a large extent on £437 million of LGF money, including private sector contributions.

GBSLEP also successfully bid for £400 million from the Regional Growth Fund between 2010 and 2015, with the cash going into 74 projects which the Government claims will create or safeguard around 119,000 local jobs and attract around £3.1 billion of further investment.

Priority is being given to regeneration schemes around the HS2 stations planned for Birmingham city centre and at the NEC/Birmingham Airport.

The Local Growth Deal will create up to 19,000 new jobs, deliver 6,000 new homes and help 7,600 people to improve their skills, which in turn will lead to increased employment opportunities for the area, according to GBSLEP.

In addition, it will help open a wider package of investment to improve transport networks, unlock stalled economic sites and boost overall skills provision.

Earlier this year GBSLEP invited applications for round four of its Growing Places Fund initiative.

A total of £3 million is on offer for ‘oven ready’ infrastructure projects through grants and secured business loans.

Rounds one, two and three have so far delivered £20.2 million to a range of schemes including the Advanced Manufacturing Hub Phases 1 to 3, Holbrook Relief Road Phase 2 in Kidderminster, Women’s Enterprise Hub, Red Carpet Cinema in Barton-under-Needwood and Solihull Town Centre Gateway. In total, these projects are forecast to create almost 10,000 jobs, more than 1,000 homes and 28,000 square metres of commercial space in the next 10 years.

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