The Department for Business Innovation & Skills has published its White Paper on Local Growth, (the "White Paper") which adds detail to the Government's plans to shift decision-making and delivery powers to a local level to promote economic growth in local economies. From the perspective of the infrastructure sector, the White Paper sets out the following key points:
The RGF
Round 1 ofbidding for funding under the Regional Growth Fund
("RGF") is now open and closes on 21
January 2011. The RGF is a £1.4 billion discretionary
fund that will operate for 3 years between 2011 and 2014 to provide
economic support for projects which can stimulate long-term,
sustainable economic growth in areas that are currently dependant
on public spending.
To qualify for RGF funding, applicants must show that the proposed
project is:
- Located in a suitable area (with high levels of reliance on the public sector).
- Additional (i.e. why the project would not otherwise proceed at the proposed location due to market failure).
- Able to create sustainable private sector growth.
- Value for money (with a focus on job creation).
- In compliance with EU State Aid rules.
LEPs
The White Paper provides detail on the approval of the first 24
Local Enterprise Partnerships ("LEPs"),
which have been created with the purpose of identifying areas of
economic opportunity in their local areas. LEPs are intended
to replace the Regional Development Agencies which will cease
activity in March 2012.
The Government has not been prescriptive in setting out specific
duties that LEPs must perform, but potential roles include:
- Applying directly or co-ordinating applications for RGF funding.
- Partnering with local authorities to create local transport, housing, community low carbon energy and other development plans.
- Liaising with the Government to identify key local investment priorities and leveraging funding from the private sector.
- Making representations on national planning policy to help streamline the delivery of future projects.
- Promoting "local asset backed vehicle" schemes, which allow local authorities to use surplus and brownfield land assets to lever investment from the private sector.
LEPs will not be defined in legislation and there is no prescribed
legal structure. They will not be funded by the Government
and must meet their own running costs through funding from local
authorities (which are already facing cuts) or local
businesses.
What does this mean for infrastructue investors?
The White Paper places particular emphasis on the importance of
local transport infrastructure and housing as enablers of economic
growth. In addition, it identifies the development of a low
carbon economy as a key strategic objective of investment.
However, the ability of the RGF and LEPs to deliver on these
objectives remains to be seen.
In particular, the eligibility criteria for RGF funding (described
above) and the limited size of the fund when spread over 3 years
may limit its relevance to larger scale local infrastructure
projects. However, a clearer picture will emerge once applications
for funding are submitted in early 2011.
Further, the White Paper raises more questions than answers on the
role that LEPs will play. The absence of Government funding
makes it unclear how LEPs will have sufficient resources to develop
competitive applications for RGF funding or deliver infrastructure
projects in the absence of such funding. However, investors
may be interested in reviewing the LEPs' business plans (which
can be found here), many of which place the development of
improved transport, community energy and social infrastructure at
heart of their proposals.
The White Paper also provides further detail on the package of
incentives that local authorities will be able to draw on to help
deliver economic growth objectives, including the New Homes Bonus
and the proposed introduction of Tax Increment Financing.
Click
here for more on Tax Increment Financing.
Click here to access the full text of the White
Paper.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 29/10/2010.
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