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Are the LEPrechauns spending our money wisely?

Summary:
A leprechaun is the Irish for a small body not entirely engaged with our world, rather like, as will become clear, a Local Enterprise Partnership (LEP). 39 (now 38) LEPs were created in 2011, linked to local government, to devolve the simulation of economic growth across England.  So far, they have spent about £7.6bn, but much more is in the pipeline, including the previous UK contribution to the EU for local enterprise support. The Ministry of Housing, Communities & Local Government (MHCLG) is responsible for supervision and funding.The National Audit Office reviewed LEPs in May 2019 and was less than complimentary (para.13): “the Department [i.e. MHCLG] has made no effort to evaluate the value for money of nearly £12 billion in public funding, nor does it have robust plans to do so. The

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A leprechaun is the Irish for a small body not entirely engaged with our world, rather like, as will become clear, a Local Enterprise Partnership (LEP). 39 (now 38) LEPs were created in 2011, linked to local government, to devolve the simulation of economic growth across England.  So far, they have spent about £7.6bn, but much more is in the pipeline, including the previous UK contribution to the EU for local enterprise support. The Ministry of Housing, Communities & Local Government (MHCLG) is responsible for supervision and funding.

The National Audit Office reviewed LEPs in May 2019 and was less than complimentary (para.13): “the Department [i.e. MHCLG] has made no effort to evaluate the value for money of nearly £12 billion in public funding, nor does it have robust plans to do so. The Department needs a grip on how effectively these funds are used. It needs to act if it wants to have any hope of learning the lessons of what works locally for future interventions in local growth, including the new UK Shared Prosperity Fund.”  This will replace the €16.4bn. the UK received annually from the EU split equally across three funds: regional, agricultural and social, i.e. not enterprise. The government intends to use these funds to “reduce inequalities between communities”. Consultation is, or was, due during 2020.

Whitehall introduced no less than 54 local investment schemes between 1978 and 2016.  The LEP Network Operations Plan 2017-2018 gives no indication of costs, objectives or achievements.  The “plan” is simply that LEPs should communicate with one another. The “Local Growth Fund” has been the subject of continual tinkering since inception in 2013.  And “Growth Hubs” which “are different to LEPs in that they are focused on the tangible delivery of business support within each region. Growth Hubs provide face-to-face professional advice to businesses and signpost them to the best resources from both the public and private sector within the area.”

In fact Growth Hubs are LEP subsidiaries and provide both advice and money. The Hertfordshire Growth Hub aims to be the best in the country. In 2018/19 it provided £570K to over 200 businesses, £300K being from the EU and £270K from the MHCLG. Advice is free from eight full time professionals, a consultancy firm and the local university but there is no indication of the cost of the Hub nor value for money. It is linked with the local chamber of commerce.

The question is whether LEPs contribute, on net, to the economy. Their title indicates that to be the intention: “Enterprise is another word for a for-profit business or company, but it is most often associated with entrepreneurial ventures.” The quarterly performance figures LEPs report to MHCLG, however, are only loosely connected with that word (NAO 2.26): “financial spend; jobs created; number of apprenticeships created; number of new homes completed; and flood risk prevention.” Job creation is most definitely not a measure of economic growth, particularly for a country seeking increased productivity.

42% of Growth Fund (LEP) expenditure goes on transport projects, 20% on “skills” (presumably apprenticeships), 17% on “economic development”, 9% on site development (mostly housing) and 12% on (unexplained) “other” (NAO Table 11). Economic development includes “broadband infrastructure, regeneration and business support”. In short, very little goes on enterprise.

Important as they are, housing, flood defence and infrastructure are public expenditure, i.e. matters for national and local government. Government should not pretend to be stimulating private enterprise when the money is really going on public projects.  To confuse matters further, local government does spend on economic development alongside LEPs though this declined from £1bn. in 2010/11 to about £400M in 2012/3 and thereafter.

The LEP Network sees the future as creating vague “strategies”. The New Anglia LEP strategy, for example, notes three regional strengths (clean energy, agri-food and ICT digital creative), and the developments taking place in those sectors, but says not a word about actions to be taken, expected outcomes or the contribution the LEP will make.  The local pictures are pretty enough but this is motherhood.

LEPs and the other local quangos are a maze of good intentions leading to muddle and confusion.  Early stage entrepreneurs simply do not have the time to explore the myriad schemes available, still less go through all the application processes. There should be one simple and long-lasting scheme. What should be done?  Let us start with some positives.  Devolving economic stimulus from Whitehall to local is good and allows, as now happens, funds to be weighted towards the regions that need them most, notably the north. Some SMEs and start-ups need both money and advice, others one or the other.

Recommendations:

  • Growth Hubs should be retained but limited to face-to-face advice under the direction of local chambers of commerce which understand business better than local government. Advice should remain free to clients but costs, effectiveness and efficiency should be monitored professionally and performance compared across all Hubs in England.

  • Apart from those needed by Hubs, LEPs should be closed with public expenditure responsibilities being returned to local government, private sector advice to Hubs and private sector funding to a focused non-quango scheme. The Dragons’ Den provides a possible model.  The taxpayer should have more faith in the judgment of a private investor keen to put his or her own money into a project than that of a small body of people not needed in the office.  One possibility is the business angel top up scheme but just one simple scheme should be adopted.  As with Hubs, the very little administration would best be conducted by the local chamber of commerce.

  • These recommendations, if adopted, should be piloted and revised before being rolled out nationally.

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Tim Ambler
Tim Ambler (born 1937) is a British organizational theorist, author and academic on the field of Marketing effectiveness. Ambler featured on Marketing's list of the 100 most powerful figures in the industry. He is cited by the Chartered Institute of Marketing as one of the top 50 marketing experts in the world

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