The main news this morning is that the Lord Heseltine report into economic growth contains a handful of withering criticisms of the coalition (although to be fair he is trying to remain on-message during his many interviews):
* The former deputy prime minister says he frequently hears complaints the UK “does not have a strategy for growth” and business leaders had a “powerful appetite” for a stronger vision. While there have been Treasury growth plans, he writes, “put crudely who knows of them?”
* The veteran peer calls for “war psychology” to deal with the economic crisis. He demands an end to ministerial uncertainty on crucial issues such as energy and aviation.
* He said that current structures did not enable the government to “work together coherently” on economic strategy. The report adds that “it takes too long for decisions to be made” by the government with a tendency to “kick difficult questions into the long grass”.
* He also criticises the idea that a major deregulation drive – an article of faith for the Tory right – is the best way forward.
But what is “Tarzan’s” favoured prescription for this malaise?
There are some 89 recommendations in the report, which was commissioned by David Cameron and is published here on the BIS website.
Some of these will be dismissed out of hand; for example scrapping all district councils to create universal unitary authorities. Others will be easy to carry out, for example putting businessmen on school boards.
One coalition aide described the package as “Heseltine’s greatest hits”, containing old favourites such as city mayors, a development corporation for Thames Gateway and more businessmen in Whitehall.
The main idea, however – which is worth analysing in full – is giving £58bn to local enterprise partnerships and letting them spend it how they like.
This is not just radical. It would represent the biggest shake-up of the state for
decades and involve the dismantling of huge amounts of government.
Heseltine is talking about 59 separate budgets including EU funds (£9bn), adult skills (£10.7bn), local authority capital spending (£8bn), apprenticeships (£3bn), flood defences (£2.6bn), the work programme (£2.5bn) and all housing schemes (£6.8bn). All of these would be swept away and given to the single pot. The LEPs would then bid for an allocation which they could spend how they like.
The theory is that local people know best what their priorities should be.
There are questions, however, about whether the LEPs have the track record, the experience, the personnel and the funds to take on such major new responsibilities. (Bear in mind that they were only set up in a piecemeal fashion after the cull of Regional Development Agencies in 2010.)
These bodies (incorrectly called “local economic partnerships” at one point in the Heseltine report) are made up of councillors and some local business people. They vary in size and in quality.
The process of bidding for £58bn sounds rather Darwinian, the way Heseltine explains it. “If they are not up to it, give them the opportunity to come up with it,” he told me and my colleague Brian Groom on Monday. “It is a competitive process, so some will get relatively more, some relatively less.”
He went on to say that his experience of the City Challenge, Regional Growth Fund and City Deals was that competition had a “benign effect” of making those who missed out “learn the lessons in order to win next time”.
The process would reveal which regions had “no economic strengths” and they would be forced to remedy this, he argues. Which begs the question: What, with no money?
As for the localism of the funding, Heseltine is convinced that those running the LEPs know best how it should be spent. “How do they (Whitehall) know what the needs of 150,000 people in Bootle are? They have no idea.”
I gave him the example of flood defences: Surely Defra would know which areas needed the money?
“I would be the first to accept that,” he replied, before going on to say that under the current system the Treasury oversee a battle for funds which are then distributed centrally.
“It could well be that if you were to invite the LEPs to look at what they think the need of a particular area is, they would say, well, quite frankly, if it’s a choice between a brand new school, when we’ve got perfectly adequate schools, or an industrial estate to exploit the growing skills of the university, we’d rather have the industrial estate. My faith is that they’re more likely to get that right than somebody distributing cash functionally.”
This puts a remarkable amount of faith in the abilities of LEP members. Interestingly, neither George Osborne nor Vince Cable have indicated that they will drop the idea like a hot potato. Instead it is seen as “promising” within the coalition. Don’t be surprised, however, if this key idea is watered down to a much more modest initiative by the time it is spat out of the policy-making machine.
Jim Pickard
Kiran Stacey