RDAs may be going but grant-chasing lives on

We’re finally starting to see how the new Local Enterprise Partnerships (LEPs) will operate. The first 24 of these bodies were unveiled yesterday, with more to follow. The bodies themselves will not receive any central government funding; instead councils and local businesses will be pooling resources to form replacements to the RDAs, which were thankfully shown the door in the emergency budget. But the LEPs will now bid for a slice OF the £1.5 billion Regional Growth Fund. Sound familiar? Replacements indeed.

At the TPA we’ve seen first-hand evidence of a local authority writing to local businesses asking them to get involved with a LEP bid. There was no mention of promoting real economic growth for the area through cooperation, and all the other good stuff we hear about in government press releases. What we saw instead, unsurprisingly, was an invitation to get involved in the hunt for grants - read taxpayers' money. Something along the lines of “if we don’t work together, you’ll miss out on free money”. Really, the plea was that bare-faced.

Secretary of State for Business Vince Cable went before the select committee the other day finally outlining how LEPs will be funded. Committee chairman Adrian Bailey said:

"The most disadvantaged regions are those with the most public sector employment – and they often lack the business capacity to submit funding bids to the regional development fund. The fact that there appears to be no funding in central government for it means there is no funding system to develop the expertise and develop the bids. Local government is not at the moment going to be funding extra obligations."

So let me see if I’ve got this right. Essentially LEPs need central government money to develop the expertise to bid for more central government money? Hmm. RDAs have been abolished, but the grant-chasing culture they engendered lives on in policy makers. It’s a shame because some of the proposals in the local growth white paper released yesterday seem sensible. But this mind-set must be eradicated once for all for good business policy to be formulated.

But how can we get the private sector going without giving them a kick-start with taxpayers’ money? Here’s a thought: let local areas be tax competitive. If the North East or South West rely so much on the public sector for jobs and money, let councils set and keep their own tax rates. You can bet that a competitive rate would spark an influx of private businesses, creating jobs and wealth for the area. The prospects for economic growth with fiscal decentralisation – for regions and the UK as a whole – are enormous. Our tax system is one of the most highly centralised in the world and I’ll let former city and Treasury economist Mike Denham explain the benefits of reforming this system here.

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