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14.10.13

Growth deals for LEPs

Source: Public Sector Executive Sept/Oct 2013

Threats to the accountability of LEPs and how to manage the big four – by Sue Chadwick, corporate lawyer at Essex City Council, and Anja Beriro, part of the government and infrastructure team at law firm Browne Jacobson LLP. 

Background

ince the Treasury’s response in March of this year to Lord Heseltine’s report ‘No Stone Unturned in Pursuit of Growth’ (October 2012) it has become clear that the Government is starting to put its money where its mouth is in terms of localism. Local Economic Partnerships (LEPs) were given a boost last autumn with the confirmation that core funding of up to £250,000 would be available to each LEP for the next two financial years. Central government has made it clear that LEPs should be using this time to negotiate longer term funding deals (Growth Deals) to begin in 2015 when the Local Growth Fund, championed by Michael Heseltine but smaller than he would have liked, goes live.

The challenges that were laid down in the All Party Parliamentary Group ‘Where Next for LEPs?’ are the same ones that we are now seeing in the latest guidance on Growth Deals and European and Structural and Investment Funds (published in July 2013). 

For LEPs to ensure maximum success in the bidding for the Local Growth Fund and the next round of EU funds, they will have to show a level of joined-up working, accountability and leveraging in of support from the private sector that in many cases goes beyond what LEPs are currently doing. But this is achievable by negotiating a good Growth Deal with central government. A possible sticking point for many LEPs will be demonstrating acceptable levels of accountability, given the very light-touch approach that central government has adopted (as demonstrated in its July response to the report by the BIS Committee on LEPs). Moreover, accountability doesn’t stop at those issues highlighted in the Guidance. This article looks at four areas of ‘accountability’, assesses the threat posed to the successful operation of an LEP, and how the risk might be managed.

Governance

Whilst central government has said that it is not necessary to have constant monitoring of LEPs, the Guidance shows that it will become increasingly important to have properly documented partnership arrangements to give confidence in the ability of the partners to provide strong leadership and effective governance. 

The Guidance mentions ‘democratic accountability’ on numerous occasions and acknowledges that this can only be through the elected members of the LEPs. At the same time, the Strategic Economic Plan that will be used to negotiate an area’s Growth Deal must show that the private sector is on board, without allowing any single contributor to have too much control.

From a local authority’s perspective, these are some considerations that may help in planning their involvement: 

• Assess the current arrangements between the LEP and the local authority acting as the accountable body against the delivery criteria set out in the Guidance to see whether anything needs to be changed or improved; 

• Plan to have arrangements in place dealing with conflicts, whistle blowing, declaration of interests, decision making, delegation, access to and disclosure of information; 

• Continue to show prudent use of public money as part of their own obligations; 

• Consider how they can pool resources, rationalise assets and promote economic development (and this includes the smaller district councils), as the Guidance suggests will be looked on favourably; 

• Take a long-term and strategic assessment of their own aims and objectives and then talk to their LEP partners, and possibly those in other LEPs as well, to ensure that such things can be planned into individual strategies; 

• Consider how the governance structure of a shared services arrangement (the Guidance encourages these) could include elements of the work that the local authorities will do for the LEP; 

• Consider whether a combined authority would be the best way to show strong accountability over the whole LEP area. This may not be appropriate, particularly where local authority boundaries span two LEPs, so what other joint decision-making structure could work? 

Public Sector Equality Duty (PSED) 

This duty – or more specifically, lack of compliance with this duty – is a live and enduring issue, most commonly in the context of cases such as South Tyneside1 where a local authority considers changes to a service such as provision of care homes. 

The scope of PSED is wider than many decision makers appreciate, and could potentially affect decisions made by or on behalf of a LEP. 

The PSED is contained in s149 of the Equality Act 2010 and applies to any ‘public authority’ in the ‘exercise of its functions’. LEPs are not included within the list of public authorities specified in Schedule 19 of that Act. 

However, the meaning of ‘public function’ is broadly defined, with reference to its use within the context of the Human Rights Act 1998. 

Where an LEP has made a decision involving the use of public funding, and needs a further decision by a local authority acting as its ‘Accountable Body’ to take that decision forward, it should ensure that the local authority in question has made that decision in compliance with the PSED. 

This means that the relevant local authority must have had ‘due regard’ to the need to: (a) eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under this Act; (b) advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it; (c) foster good relations between persons who share a relevant protected characteristic and persons who do not share it.’ 

Ensuring that this requirement is met can be a relatively simple matter, made easier by good, clear documentation; decisions made without the necessary compliance may well be at risk of challenge and resulting costs and delays. 

In the wider context, the government is already advising LEPs to build equalities considerations into their applications for European Structural Funds.2 

Strategic Environmental Assessment (SEA) 

The Conservatives announced their intention to revoke Regional Spatial Strategies (‘RSS’) in 2009 and that process is now completed. LEPs have not replaced RDAs on a like-for-like basis but it is fair to say that they have grown to occupy the space left on the regional planning stage. The Government has already fallen foul of European strategic planning requirements in the abolition of RSS documents3; there is a risk that LEPs and their new strategic plans could too if they are not careful. 

The environmental assessment of plans and programmes is an established requirement of planning law, arising from SEA Directive 2001/42/EC and implemented by The Environmental Assessment of Plans and Programmes Regulations 2004 (SI 2004 No.1633). 

Under Article 2(a), the plans and programmes subject to the Directive include those which are: subject to preparation and/or adoption by an authority at national, regional or local level or which are prepared by an authority for adoption, through a legislative procedure by Parliament or Government. 

Regulation 2(1) defines ‘plans and programmes’ as documents “subject to preparation or adoption by an authority at national, regional or local level…” Regulation 5(4)(b) then goes on to say that where a plan or programme is to be adopted which “sets the framework for future development consent of projects…there is a requirement for an environmental assessment in compliance with the 2004 Regulations.” 

It is clear that LEPs are not intended to operate as planning authorities. It is equally clear that their strategic plans are not intended to be local or regional planning documents. Nevertheless, the Directive is traditionally interpreted in a purposive way. 

If, or perhaps when, LEPs start to use their plans to identify preferred locations for particular activities, and indicate their support for and funding of specific developments on identified sites, particularly where this includes local or combined authorities approving such plans as part of their own decision-making process, they risk making those plans into documents that set the framework for future development consents, requiring formal assessment of their environmental effects. 

State Aid 

The distribution of funding by a LEP will often bring with it concerns about breaching state aid rules. State Aid occurs where a ‘measure’ is 1) with or through state resources; 2) favours a particular undertaking or the production of certain goods; 3) distorts or threaten to distort competition; and 4) affects intra-community trade. Favouring an undertaking occurs when support is limited to specific undertakings or in a region or sector and includes loans ‘at a favourable rate’. 

Clearly, the Local Growth Fund will be state resources and a LEP will need to ensure that it has structured the funding of projects and businesses in such as way that it is not giving particular entities an unfair advantage. If it was to be decided that funding (even as a loan) was illegal State Aid then the funding would need to be returned and there could be a large fine. 

Obviously this would have negative affects on the economic development within an area. 

Such drastic consequences can be mitigated by having a thorough and working knowledge of the main risk mitigation measures and structures within the parameters of approved state aid exemptions and this is an area where specialist legal advice should be sought.

About the authors 

Anja Beriro is part of the Government and Infrastructure team at Browne Jacobson LLP and regularly advises local authorities and other public sector bodies on shared services, governance arrangements, procurement and general commercial issues. She can be contacted on 0115 976 6589 or anja.beriro@brownejacobson.com. Sue Chadwick is a local authority lawyer with more than 20 years experience in planning, governance and development.

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