Audit Committee, 22 Jun 2004

Meeting date: Tuesday, June 22, 2004

Official Report 139KB pdf

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Local Economic Forums

Agenda item 2 is a briefing from Audit Scotland and the Auditor General on "Local economic forums: A follow-up report", which was recently published by Audit Scotland.

I invite Arwel Roberts to introduce the report to members.

Local economic forums—LEFs—are partnerships of public sector agencies and local businesses that are intended to achieve a simpler and more cohesive structure for local economic development in Scotland in order to deliver maximum benefit to businesses and communities.

When LEFs were set up in 2001, the Executive asked Audit Scotland to monitor their progress. In October 2002, we produced a baseline report that set out a benchmark against which to measure progress. The 2004 follow-up report reviews the performance of LEFs against the baseline.

Overall, LEFs have streamlined business support services and have made more effective use of public funding to support local economic development. There have been a number of achievements by LEFs.

First, LEFs have reduced overlap and duplication. They have implemented 80 per cent of their planned actions to eliminate duplication by local enterprise companies—LECs—and councils in areas such as the provision of financial assistance and business skills training. Surveys have shown that the business community thinks that LEFs have made no significant impact, but it is likely that changes that are brought about through LEFs will take time to be felt at a local level.

Secondly, LEFs have delivered most of the financial benefits that were expected of them, which has resulted in better use of public funding.

Thirdly, LEFs have taken steps to improve how public sector bodies communicate with the business community, although the perception among LEF members themselves is that communication among partner organisations has deteriorated.

The report makes a number of recommendations. On the impact of forums, it proposes that the Scottish Executive should review the added value that is delivered by LEFs and consider whether they still have a worthwhile role to play against the backdrop of the introduction of more comprehensive, statutory community planning arrangements. It also proposes that the Executive should work with Scottish Enterprise and Highlands and Islands Enterprise to investigate the wide regional variations in the business sector's views of public sector business support services.

The report recommends that if LEFs continue in their current form, the Executive should continue to monitor their impact on the business community, and that it should work with Scottish Enterprise and Highlands and Islands Enterprise to determine the views of the business sector and to monitor and evaluate the progress being made by LEFs in achieving their economic development objectives.

My colleagues and I will be happy to answer any questions about the report.

I was on the original Enterprise and Lifelong Learning Committee that recommended setting up the structures that we are discussing. One of our key concerns was that an on-going process should not develop. We wanted the structures to do the job of trying to eliminate duplication and overlap in services and the report seems to indicate that, in some ways, there have been significant successes. Will you highlight the areas of the country in which local economic forums have not worked and in which duplication and lack of co-operation are continuing, and say why that has been the case in those areas?

There are details about such LEFs in the report. I invite Bob Leishman, who worked on the project, to say which ones they are.

I think that LEFs have worked best in areas in which the LEC and the local council share the same boundaries. In areas in which there are cross-boundary issues, work has probably been less effective. There have been particular difficulties in areas such as Highland, where there is one council and half a dozen LEFs.

It is clearly recommended that there should be a review. What is Audit Scotland's view? Have LEFs done their job? Does Audit Scotland think that they should be amalgamated into community planning, or are you hedging your bets?

Many people who are involved in the partnerships hold the view that, now that new community planning arrangements are in place, the purpose for which LEFs were originally set up is in effect being overtaken. That is what lies behind our recommendation that the Executive should review whether LEFs still offer added value.

You also recommend an investigation into regional variation in the business sector's views. Do some areas find LEFs more useful than other areas do? If so, is that because LEFs actually have been more useful in some areas, or is it simply that people have different views and the issue is not to do with delivery?

One of our recommendations is that the Executive should consider why such regional variations exist, but it is worth emphasising that we obtained a mixture of results from surveys and the perceptions of the participants. The perceptions are not always the same. Part of the reason for the differences lies in how people see the benefits that have arisen from LEFs.

I would like you to respond to an anxiety that I will share with you. I am somewhat concerned that much of the report and what has been said this morning seems to imply that one size can fit all. I am not sure about a top-down Scottish Executive review, but I am attracted to the notion that there should be a review that considers the future of LEFs in the light of the developing community planning infrastructure. I would be greatly concerned if we were caught up in the next two years with navel gazing about the particular structures and committees that should be put in place. Is it not important to be clear about what we want to achieve? After all, partnership working is a means to an end and not an end in itself. Is there not some way of allowing greater scope for different local areas to grow structures, partnership working processes, decision-making structures and so on that will deliver most effectively in their area, taking into account, for example, the fact that coterminosity does not exist throughout the country?

Certainly. The guidance under which LEFs were set up recognised that they must tailor their activities and how they put together their structures to match the reality on the ground. Having a one-size-fits-all approach was never the intention. We should also recognise that the ways in which Highlands and Islands Enterprise and Scottish Enterprise deliver their business supports are different in their respective areas, so their partners need to create a different sort of relationship with them.

Each LEF develops its own action plan to ensure an avoidance of duplication and so on. As I said earlier, 80 per cent of those action plans have been delivered, but they have been delivered against a local need and not against a blanket requirement throughout Scotland. Therefore, differences are recognised.

To return to your recommendation that the Scottish Executive should carry out a review, I wonder what parameters Audit Scotland or the committee could suggest to avoid what I fear might happen, which is that there will be a hiatus for a year or two while the structures are reviewed and then a rigid template will be introduced for the whole country. Should we try to avoid such an outcome by saying more about what form the review should take?

The additional part of the scenery that has appeared since the establishment of the LEFs is the Local Government in Scotland Act 2003, which has introduced community planning. That act gives councils the lead. We would like the Executive to review and determine whether, in light of that new statutory framework, what it expects from LEFs can best be delivered through the LEF structure or through the new community planning arrangements.

I was intrigued by the comment that the LEFs seemed to work best where they had some geographic correlation with local authority areas. After all, we seem to be in a time of change. For example, the Edinburgh city region has now developed to cover south Fife, Dunfermline and Rosyth, even though the borders of Scottish Enterprise Edinburgh and Lothian do not straddle the Forth. There has also been a drive towards, if not an M8 corridor perspective, then co-operation between Edinburgh and Glasgow. Are the LEFs managing to maintain some fluidity and move with those developments or have they become hidebound and stuck? Are they capable of making the changes that are necessary to address certain structural changes?

The fundamental point is that LEFs are partnerships. They are vehicles for bringing together businesses and public sector agencies and unless those agencies and businesses are coterminous, the LEFs themselves cannot achieve coterminosity. That goes back to the earlier question whether the concept of LEFs as a vehicle for establishing partnerships of public sector bodies remains the right solution for bringing the public and private sector together or whether community planning is overtaking that approach.

I am interested in the extent to which it is possible to evaluate the LEFs' effectiveness. Much of the report focuses on how well they are managing the process of bringing the various private and public sector aspects together. However, I presume that it is still fairly early days to evaluate whether they have delivered what they were intended to deliver or have made a difference with regard to economic development.

One of the difficulties in determining the impact of LEFs is that they are partnerships and do not have a being in themselves. As they are the result of a number of parties coming together to decide how best to deal with a local issue, they can be only as good as the agreements that various partners make in that respect. In a sense, they are only a vehicle for bringing people together; they are not bodies in their own right.

But the rationale for establishing LEFs was to create economic development in their areas. There has to be some way of measuring whether they are doing that.

The basic rationale for establishing LEFs was to help to overcome a perceived overlap or duplication in the provision of business support and a lack of communication between the private and public sectors. Their impact is therefore measured by the extent to which those involved feel that they have achieved improvements. Funding is still provided through the same sources; LEFs do not provide any additional funding for the system, but simply rationalise its use.

So a LEF would be seen as successful not necessarily because it added value through measurable outcomes but because everyone involved felt positive and got on well together.

LEFs were set the objective of saving about £3.7 million out of an available budget of between £120 million and £125 million. They have achieved savings of £2.8 million, which means that that amount has been rescued from duplication and overlap and has become available for additional purposes. That money is not additional; instead, it is more of an efficiency bonus that has come about by bringing people together.

I am concerned that if community planning is used as the new vehicle of LEFs, individuals will go back into their silos. For example, in Ayrshire, there are three distinct local authorities with different demands and aspirations. However, the Ayrshire LEF managed to get individuals from the public and private sectors around the table to discuss what would be best for Ayrshire. I do not think that I would be able to sit here and say that the A77 extension was nearly complete if those people had stayed in their silos instead of considering the bigger picture.

That is why I am concerned about your comment that community planning could represent the next stage as far as the LEFs are concerned. Its advent would remove such an overview, would have no benefits in terms of the boundaries of LEC areas and would not encourage individuals to come outside the silo. Obviously, you have focused on what the LEFs have achieved, but do you have a feel for their ability to take an overview of the situation?

Basically, our recommendation about what we want the Executive to examine hangs on the phrase "added value". If relying on community planning as an alternative to LEFs is a retrograde step as far as avoiding duplication and so forth is concerned, it will not be adding value. We invite the Executive to consider whether LEFs justify their further existence by continuing to offer added value. On the other hand, if the new community planning arrangements maintain those advantages, there might not be a need to continue with LEFs.

One of the issues that drove the committee to its conclusion was that in many instances in which councils still had an economic development department—

Are you talking about the Enterprise and Lifelong Learning Committee that you served on?

Yes.

I just wanted to clarify that.

When people drilled down into the figures, they found that the half a million or million pounds that the council spent was basically used to employ people to direct businesses to the local enterprise company, which had the money to provide grants. We just wanted the councils to agree that one or the other body did that. However, it is important to remember that that can happen only once. Once it has been agreed that the LEC will lead and that the council will play a strategic role through planning and its other bits and pieces, that saving cannot be replicated. As a result, we must consider LEFs within the context of whether they continue to deliver financial benefits, which is why I support Audit Scotland's view. Margaret Jamieson raised a separate issue about the LEFs' ability to take a strategic overview, but I would hope that community planning should address that.

While LEFs have been in existence, Highlands and Islands Enterprise and Scottish Enterprise have both developed what amount to gateway mechanisms to offer businesses a one-stop shop that gives them an improved and more accessible means of accessing business support.

I thank Arwel Roberts and Bob Leishman for helping to present that report.