The fast evolving role of Leps took an interesting turn last week when the Department for Business, Innovation and Skills asked them to advise on the development of new assisted area maps for 2014-2020.
This process will require Leps to identify the areas of greatest economic need in their localities and to think harder about how residents of these places connect to economic opportunity. This focus on need, alongside opportunity, will be uncharted territory for many growth-focused Leps and provides some impetus for joining up growth and poverty reduction objectives.
Assisted area (AA) status secures eligibility for regional aid (the most obvious example of which is the regional growth fund) designed to promote economic development in selected economically disadvantaged areas. Grants can be awarded to small and large businesses in these areas without contravening state aid rules.
What difference will it make to local people?
As we know, and the consultation guidance itself points out, the assisted area maps haven’t changed in thirty years. It is the same old struggling places with the weakest economies and highest concentrations of poverty. As we also know, the evidence on the impact of area based initiatives is very mixed and Leps should take heed of lessons learnt from previous enterprise-focused scheme such as enterprise zones and enterprise areas.
The proposal to identify areas of opportunity as well as need as candidates for AA status appears very sensible. Alongside the usual suspects, the guidance invites Leps to identify ‘further wards with economic opportunities, which if awarded AA status, could support the development of economically disadvantaged communities.’ Seeking to link deprived areas to greater economic opportunities in surrounding areas is the right approach. It should help to support sustainable businesses in sustainable locations.
What difference will it make to local businesses?
The evidence around the impact of government grants on the employment and productivity of businesses is also mixed. A major study led by Henry Overman, which researched every grant and every manufacturing plant in England, Scotland and Wales over a twenty year period, suggests that although grants may result in reduced productivity, grants to smaller firms in economically disadvantaged areas can increase employment.
This direct employment impact is further enhanced when you factor in the additional economic benefits delivered by the increased level of spend/wages circulating in the local economy. This potential to create and sustain jobs highlights how business grants, such as regional aid, represent an important component of a balanced local economic strategy which prioritises jobs and growth.
Of course if we are really serious about making these connections between needs and opportunities then we need to look well beyond enterprise policies and regional aid and join up a much broader range of growth policies around skills, transport and housing.
Leps are an increasingly important piece within the local governance puzzle and their iterative evolution will accelerate sharply over the next six months. As the roles of Leps are being redefined around the development of strategic plans for European structural funding and the local growth fund, local leaders should take any opportunities to hardwire the connections between growth, jobs and poverty into their mindsets. If approached in the right spirit the AA maps should provide a helpful starting point.
I’m not sure about this idea of linking areas of economic need to Assisted Area status. Assisted Area status is all about giving grants to businesses. In many areas, especially ours, there is a high level of economic need. However, to make any sense, wards designated Assisted Areas have to have businesses in – there is no point whatsoever in making a ward with high levels of need but no businesses an Assisted Area. Thus I can’t understand BIS’ proposals to look at various deprivation type indicators at ward level. As a Lep, we are working on a proposed new map right now. Our businesses are in certain set of locations and our AA map will have to contain these wards, whether the residents of those wards are wealthy or deprived. There is simply no other way of doing it.
We must be hopeful. It’s useful but belated, that after 3 years, a link between poverty and economic growth has lightly landed at the leps door.
BIS are asking for this help with assisted area maps, because they have nothing else at the sub national level to help.
But leps have been work in progress and from a local economic development for social inclusion purposes, many are not up to speed. They are standard economic development vehicles which were spawned from an idea that we needed a narrow focus on economic growth. And simple notions of how to get it.
As this did not deal with the complex realities of attaining growth, european funds, state aid or ensuring local growth benefits the local poor, we are now into what seems to many economic development practitioners as an unnecessary messy process. A process, which is hindering real demonstrable progress on growth, social inclusion and activity beyond simplistic trickle down.
Why not just require that any Lep or public investment/grant/soft loan has to meet the following criteria: sustainable on a single planet economy basis; will contribute to health and wellbeing of the population; will narrow wealth inequalities; will provide a reasonable ROI. WE might then avoid the nonsense of spending millions on dental health promotion at the same time as subsidising sweet manufacturers with public cash.
This is a very interesting topic, especially the questions surrounding how LEPs can link economic opportunity and need when making responses to BIS. I think the debate above does though in part slightly misconstrue what BIS are seeking.
BIS’s guidance asks respondents to suggest wards with economic opportunities, which if awarded AA status, could support the development of economically disadvantaged localities. These wards needn’t be the absolute neediest in an area, given the neediest wards may not offer opportunities that could be supported by the capital investment afforded by regional aid.
The guidance also notes that economic need may be considered at different scales: at the ward/AA level and at the LEP level. This should allow LEPs in poorer parts of England – such as the one Tim describes – greater geographical flexibility to develop proposals reflecting the distribution of businesses than LEPs in richer parts of England where many places are probably too wealthy to feature on the map.