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Too big to succeed?
Local Government Chronicle – 14 November 2013

The huge South East Local Enterprise Partnership is three years old and not yet properly functioning as it struggles to define a workable governance structure. By Mark Smulian

Medieval sages are said to have debated how many angels could sit on the head of a pin.

These celestial seating arrangements had nothing on the South East Local Enterprise Partnership, which only now, three years after its foundation, might be about to settle how its constituent councils are represented.

Once that happens, it might be able to assemble its Local Growth Fund bid, having to date done nothing, according to Keith Burge, chair of Institute for Economic Development, whereby he can "attribute any significant success in the south-east economy to interventions by the LEP".

Some sympathy is in order as no one except communities and local government secretary Eric Pickles ever thought SELEP's size appropriate to its functions. Left to themselves, Kent CC, Medway Council and East Sussex CC and their associated districts would probably have formed a LEP, while Essex CC, its districts, Southend-on-Sea BC and Thurrock Council would have formed another.

Back in 2010 Mr Pickles felt too many LEPs followed existing boundaries instead of boldly crossing them in functional economic areas.

As LGC reported at the time: "Mr Pickles was particularly 'upset' that the Kent and Essex partnership had not materialised as this would have constituted a flagship proposal for the new policy."

Following ministerial arm twisting, SELEP covers three counties, three unitaries, 29 districts, nine universities and an indeterminate number of businesses. It stretches from Harwich to Hastings and from Sandwich to Saffron Walden and has an economy larger than Belgium's.

To make matters worse, it's physically disjointed. The River Thames severs Essex from Kent with just one crossing. Kent and East Sussex are joined only by three single carriageway A roads and two erratic rail lines.

Little wonder then that SELEP's record is so limited.

Things may though be about to change. Among its problems have been a board of 44 people and an executive of 24, resulting in neither body being effective.

There is now a consensus that this cannot go on, and chair Peter Jones, former leader of East Sussex, has proposed the executive will replace the board. SELEP would then be broken down into three federal areas based on the counties and their associated unitaries.

Since boards also have business and education representation, areas must sort out for themselves how districts would be represented, since there is not space for all of them, leaving the new LEP board dealing with matters of regional scale. The south-east's big advantage is that while it has pockets of serious deprivation - notably in coastal towns such as Clacton and Margate and old1er industrial areas along the Thames - much of the region is relatively prosperous.

Mr Jones is convinced that once SELEP's governance agonies are resolved, it will make a beneficial difference to the region's economy.

He says: "It is what it is. The government decided it wanted a variety of size of LEPs and it's important that there should be an organisation that is big enough to be a counterweight to London.

"The structure will, we hope, soon change to a federal one and that is taking a little time. Once that is done we can put in bids for public and private funding to 2020."

One major issue is that some 100,000 new homes are needed across SELEP over six years. Mr Jones wants to find ways to bring forward large sites that can be developed over long enough periods to attract investors to meet this huge pent-up demand.

Some depend on new infrastructure SELEP hopes to help provide, notably dualling the A120 from Stansted to Harwich, improvements to the A2 to Dover and better roads into East Sussex, where Mr Jones says "they are poor, and the whole of East Sussex only has about 12 miles of dual carriageway".

This may, however, be impaired by the government's decision to top-slice some of the New Homes Bonus to finance LEPs.

The bonus is generated from planning decisions by unitaries and districts, which may now not see the money concerned and so be unwilling to face the wrath of voters by approving housebuilding when there is no money to show in return.

All LEPs are affected, but the south-east is notorious for battles between builders and residents resistant to development.

Southend-on-Sea BC chief executive Rob Tinlin says: "It's not directly an issue for Southend, as we are a compact urban area, but many colleagues are saying that if they controversially give up some green belt for housing the bonus has at least mitigated the problems of doing that.

"If it is top-sliced to the LEP, where is the incentive for local politicians to take the flak of allowing development? If bonus money is raised in Essex and spent in Maidstone or somewhere, why would they do that? It is potentially a serious challenge to them."

Neil McInroy, chief executive of the Centre for Local Economic Strategies, says: "Pooling the bonus across a LEP is like telling someone to pool their salary with colleagues and they might get paid."

By far the largest potential piece of infrastructure in the LEP area would be a second runway at Stansted airport, its preferred option to solve the problem of regional airport capacity.

It also supports new runways at both Heathrow and Gatwick, but Mr Jones says: "There is absolutely no support here for a new hub airport in the Thames estuary, whether that's 'Boris Island' or on land." He thus curtly dismisses the mayor of London's ambition to close Heathrow and relocate it offshore, something that has provoked fury in Kent.

Mr Jones also wants to work with the nine universities to provide "a triage service for local businesses so that if they need academic expertise there is a single point of contact to direct them to the right people".

He also wants to encourage the universities to spin out new businesses based on their intellectual property, "which needs strong links with venture capitalists and banks", and to create business parks on their campuses.

While the federal structure is fairly straightforward in East Sussex and, after some arguments among districts, in Kent, Essex is thornier.

Mr Tinlin says: "The point is not population but representation. If a district is not there its county council can represent the population, but if a unitary is not on the board there would be no one to represent that place."

That means Southend and Thurrock expect seats, but as Chelmsford BC leader Roy Whitehead (Con) points out, his area has as large a population, as do Colchester and Basildon.

Everyone accepts the unitaries must be on the board, but who else should be? Essex already organises itself into economic 'quadrants' and may use those to solve its LEP representation issues.

Cllr Whitehead says: "Working with East Sussex and Kent is a challenge, let's put it that way. Essex is a very large county and north Essex looks to East Anglia and south Essex to London.

"Essex does not really fit with the rest of the LEP and my concern and frustration is that this means we spend more time on governance issues than on doing things" Mr Tinlin echoes this view: "We suffer from having Eric Pickles' brainchild for a LEP. It is too big, and getting decisions taken can take a long time."

Both Kent and East Sussex are happy with a federal arrangement, their leaders say. Kent's Paul Carter (Con) has a long list of freedoms and flexibilities he would like the LEP to gain from government.

Chief among these are powers over housing. "There are sites with no developer value where by changing the rules for paying for community infrastructure levy and providing social housing, we could make those sites viable to get houses built. "We also need no-go zones in some coastal areas to prevent any further transfer of troubled families by London boroughs for 5-10 years. We need powers to shut down some of those places, which are like the third world."

He also wants Kent to get a slice of the new tax on foreign lorries, not least since the county originated the idea.

East Sussex leader Keith Glazier (Con) says: "Hastings is our most deprived area and we are developing enterprise centres there and at Bexhill and Eastbourne, and we hope Hailsham. They will be flexible buildings from business start-ups. East Sussex might look prosperous but don't think we haven't got rural poverty."

His priority is electrification of the Ashford-Hastings line so that trains via High Speed1 could reach the area. Mr Jones became LEP chair this summer and its chief executive Susan Priest resigned in July.

Interim director David Godfrey has been seconded from Kent and a permanent appointment is due next spring.

SELEP may not have much to show for itself, but the new regime hopes to overcome its inherent problems and get projects started. Unlike some LEPs, it at least serves an economic area that is relatively thriving.

Doubts about a 'huge, unwieldy model'

Economic development experts remain dubious about SELEP and critical of its record. Keith Burge, chair of the Institute of Economic Development, says: "The huge, unwieldy model adopted appears to have been a drag on progress, and the introduction of a new federated model seems to confirm that the original design has not worked.

"Colleagues in that part of the world tell me they cannot attribute any significant success in the south-east economy to interventions by the LEP. It is so big it has had to spend time on sorting itself out rather than on activity; it had not got around to doing that yet.

"I'm not sure the federal structure will solve it. You could have the worst of both worlds with the LEP still there but another layer of bureaucracy for the federal bodies, though if it were a move towards admitting they need three separate LEPs that would be fine."

Neil McInroy, chief executive of the Centre for Local Economic Strategies, says: "Working across counties can be quite fraught because you have an issue of accountability. One local authority will be the accountable body but there will be an issue of where the money is spent.

"Greater Manchester has only 10 authorities and they have all worked together for 20 years or more and it's a functional economic area. Is the south-east that? I can't see what north Essex and East Sussex have in common."

LGC View: Local enterprise partnerships. By Mark Smulian

The governance arguments that hobbled the South East Local Enterprise Partnership perhaps tell us something about what any further top-down reorganisation of local government would be like.

It's clear that few involved with SELEP thought a vast disparate LEP on its current boundaries would be sensible.

By switching to a county-based federal structure SELEP is going as far as it can in dismantling itself.

SELEP exists only because Eric Pickles thought it would be a good idea to combine areas in a way he assumed were functional economic ones just as, 40 years ago, his predecessor Peter Walker created the now-defunct counties of Avon, Cleveland and Humberside, whether or not those affected agreed.

With so many districts now sharing some or all services and senior or all staff, there has inevitably been talk around the sector about how long the two-tier system can last. Some think the plethora of emerging sharing arrangements points the way to the eventual creation of new unitary councils.

If that does come to pass, it should be because those involved want to change and can carry public opinion with them.

That could see new unitaries created from, say, two or three districts and disaggregation of their county councils, or even entirely new constructs based on travel-to-work areas. But if someone were again to sit in Whitehall and draw lines on a map to delineate what they consider to be sensible local boundaries, neither Mr Walker's 'new' counties nor Mr Pickles' giant LEP offer happy precedents.