A deal of delight

A deal of delight

A new city deal signed between central government and authorities in Leeds could prove a real boost to the city, says Peter Baber.

It may be early days yet, but there could be a new mood in the air among local politicians and business people who take an interest in how the Leeds economy is funded.

For years, and particularly across much of the last decade, the cry went out that too many decisions about what to invest public money in were left in the hand of central government, who didn’t always have sufficient knowledge to know what was needed, had their eyes on other issues, or sometimes, it was quietly whispered, didn’t even care.

A case in point was Leeds’ ill-fated Supertram project, sacrificed, some argued at the time, so that London could have its Crossrail project at least under construction in time for the Olympics.

Such moaning, it has to be said, was not just a Yorkshire thing. Over in Manchester those supporting the extension of that city’s Metrolink network, including the Chamber of Commerce, used to argue that if only councils like Manchester City Council were allowed to borrow on the open market, schemes like the Metrolink would be progressed so much more quickly, and with it would come the long promised splurge in jobs. Well, all that could change this autumn.

Because in September central government, and in particular the Treasury, signed a deal with Leeds City Council that it says will give the region much greater powers and levers to pull together £200m of resources into a single pot in return for the city and wider region agreeing to explore more ways of raising money locally and of working together on key issues.

The agreement was one of eight the government signed with councils representing the UK’s core cities outside London. Apart from Leeds, these are Birmingham, Bristol, Manchester, Newcastle and Sheffield.

It has been hailed by both sides of the negotiations. Deputy prime minister Nick Clegg said the city had “signed a deal to hand chunks of power over from Whitehall control”. He said this was “a dramatic shift that will mean everyone in Leeds will feel the benefits”.

“There is enormous potential in Leeds,” he added.”The city is an economic powerhouse generating £52bn for the UK economy, so it makes sense that Leeds itself decides how to make that powerhouse grow”.

From the city, Tom Riordan, chief executive of Leeds City Council, said: “Today’s signing is a very significant moment for Leeds and the wider city region as it gives us the chance to start controlling our own destiny in ways that we have never been able to before.”

That bit about the city region is important, because, according to Neil McLean, chair of the Leeds City Region Local Enterprise Partnership (LEP), although the City Deal itself is, as its name implies, between central government and Leeds City Council, it has already been agreed – as it has been with the other seven core cities – that the surrounding city region will benefit from and contribute to the plan.

“The trouble now is that those LEPs which do not have a core city say they want some of this too,” he says. (One need only mention that the York and North Yorkshire LEP, by contrast, does not include a core city.)

But haven’t we been here before? Isn’t this kind of autonomy exactly the kind of thing that Yorkshire Forward was supposed to be the end of the 1990s? McLean, a former managing partner of DLA Piper’s Leeds Office, insists that the strategies might look similar, but the way they will be delivered will be completely different.

“Yorkshire Forward was a largely centrally created and funded agency with a huge staff. We are nothing like that,” he says. So what are the priorities under this deal, and how will they be worked out? In Leeds’ case, the deal is first and foremost about what those who agreed it call a “guarantee to the young” – in other words, it’s about jobs and training.

The guarantee is that every young person in the Leeds City Region has access to a job, training, apprenticeship volunteering, or work experience. It wants to see 2,500 apprenticeships across the city, with a further 15,000 new apprentices in learning, by 2016.

The deal document that the LEP first put together in July points out that skill levels among the city region’s workforce remain below average, and it wants to correct that. A long term goal is for Leeds to become “NEET-free” – NEETs being young people who are not in work, employment, education or training.

Although no deadline has been set for when that particular threshold might be passed, Peter Roberts, chief executive of Leeds City College, says the city is at least heading in the right direction, because NEET numbers are already coming down.

On a practical level, it is his organisation that will be feeling the earliest impact of the City Deal, because it will be the venue for an Apprenticeship Academy promised as part of the deal.

Due to open its doors in September 2013, the Academy will be unusual, and a new departure for the college, because it will be accepting students from 14 upwards, rather than 16.

“Students at that age will follow the national curriculum, but it will be tailored to giving them more work experience, and in particular building up the softer skills employers say they want to see, such as numeracy and attendance,” says Roberts.

“It will give young people the chance to test vocational areas, which conventional schools can’t always do. The college can run this as part of its existing infrastructure.”

But of course, taking on apprentices is a two-way process at least, so the City Deal also envisages the setting up of apprentice training agencies (ATAs), initially in Leeds and Bradford, with similar initiative opening elsewhere later.

Roberts says these will be firmly aimed at making it easier for local employers to take on apprentices. “In the recession firms have been reluctant to take on apprentices,” he says, “but they might be interested in being part of a group that takes the apprentice on over a period of time.

“The ATA acts as the middle man, as they employ the young person. If the company goes bust, for example, the apprenticeship continues, because they are employed by the agency.”

The idea is also that any young person at the academy who has not found an apprenticeship by the time they turn 16 will be transferred to the ATA to be farmed out by it.

Although initially funded by the City Deal money, Roberts says the ATA that his college and the council are setting up as a joint venture and which they hope to open within the next few months should quickly become self-financing from the fees paid by the 300 companies he hopes to target in the first two years.

But won’t employers be confused by what is on offer? After all, it is only three years since Leeds City College itself was formed from the merger of three existing institutions.

And on a wider scale, it is only a little longer since the skills sector as a whole went through the ruction of seeing the Learning & Skills Council abolished to be replaced by two separate agencies.

How will an uninitiated employer know where to go? Robert admits to the confusion, but says he hopes a recent good Ofsted report on his college and publicity from it being named partner of the year by Leeds City Council should put employers in the right direction.

“We really want to get into the position where we can say to employers: ‘If you have any questions about apprenticeships, contact the ATA,’” he says.

The other main tangible benefit of the City Deal agreement looks likely to be transport. The deal gives the region power to establish a £1bn West Yorkshire Plus transport fund, financed by a local levy on local councils and a ten year funding allocation from the post-2014 Major Transport Scheme Budget.

This would go some way to establishing the wider Northern Hub system the original deal document claims is so essential to link up northern cities as an economic powerhouse, and more particularly to fund the electrification of the northern Transpennine line (between Leeds, Bradford, Halifax and Manchester).

There is, of course, a much more widely trumpeted and larger scale rail project coming to the north in the shape of HS2, the proposed high speed rail link that in its second phase will link London to Manchester and Leeds.

But those backing the deal say there is no danger that the bigger project will usurp funding from the rest. LEP director Ben Rimmington says the government has already committed to spending £500m on the Northern Hub and £250m on the Transpennine electrification in the 2014-2019 spending period.

But Mclean goes further, saying that HS2 is coming out of a completely separate pot of money that will only become available as the Crossrail project comes to an end.

“We have been for a number of meetings with the Department of Transport, and other stakeholders, and we have been given an understanding that the local networks will not be put back on the shelf because a large project like HS2 is coming,” he says.

Transport improvements, the deal document claims, could create a 2% uplift in the city region’s economic output and 20,000 extra jobs.

As part of the transport deal, however, and to build up a city investment fund, the city region will also be allowed and required to look at other forms of raising money, in particular at tax incremental funding (TIF), a system that originated in the USA where local councils can borrow to fund capital projects against the expected rise in rate returns that such projects might produce.

The city region may also look at the possibility of lending against assets, including the local council’s pension pot, although Rimmington says much of this is still in the planning stage and Leeds hasn’t gone down the TIF road as far as Newcastle, for example. But McLean says he has no issue with the public sector making potentially more risky financial arrangements.

“In these harsh economic times everybody is having to think slightly differently about how public projects will be funded, and every option is having to be reviewed, including TIF,” he says.

He says one unexpected benefit of the economic downturn he has noticed since taking on his LEP position is that more people are realising that they have to work together on issues.

That may be why one of the other commitments the city region has made as part of the deal is that all the 11 individual authorities will work together on large projects such as transport as a combined authority McLean insists this is not the same thing as a unitary authority, and certainly not the same thing as the old West Yorkshire County Council of the 1980s, which many business people blame for adding an extra layer of bureaucracy.

“Initially this authority is being set up to look at transport issues,” he says, “although it may look at other areas too. “We are ensuring that there is a governing body that is focused.

“It will not be a super council, and will not be a return to the old West Yorkshire authority. “In any case, each authority will have to take a vote on whether it wants to be part of the combined authority or not.

“Bringing together councils in this way could actually be more efficient. Manchester already operates under a combined authority in this way.” He thinks the match up between what the LEP first asked for when it produced its strategy last September and what the Deal entails is very encouraging.

“They have followed the same priorities,” he says. “The fact that that has happened means there is absolute commitment at the highest level. But underneath the main priorities there are other issues that have to be addressed, and these are still a work in progress.”

These might include a boost to exports – the proportion of Leeds City Region businesses who currently export outside the UK is still only 10%, and to address this the LEP is planning a trade mission to the USA based around Leeds strong medical devices sector.

McLean says business innovation could and should be another target: the LEP already has a special interest group looking at that. Because, in the cold light of day, there is no question that the city region needs to improve economically: figures show that it currently generates about £28bn in tax revenues, which is £6bn less than government spends locally.

That kind of statistic might even make some people think central government was justified in hanging onto the purse strings in years gone by. However, the whole idea of the City Deal is that the impact of such things at the Transport Fund will be enough to turn that situation around.

McLean is hopeful that central Government’s decision also in September to provide all LEPs across the country with core administrative funding is a sign that successful LEPs could soon be given more responsibilities.

Because he says there is much to be done. Always lurking behind any discussion about economic investment into deprived areas is what might happen if nothing happens.

The deals report makes reference to last summer’s riots, even if West Yorkshire as a whole emerged from them relatively unscathed.

“That is because we have built a good relationship between various bodies across the city,” says McLean.

“But there remain some substantial socio-economic problems within the city region, and they have to be addressed.”