Recruited will need start-up of government funding (Telegraph)

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A report by a Department for business, innovation and Skills (BIS) select committee analysing the Government's policy of scrapping Regional Development Agencies (RDAs) has said that the Government may need to support the replacement bodies with start-up funding and the "retention of RDA know-how" before they become self sustaining.

While Local Enterprise Partnerships (LEPs), the new bodies that will oversee regional economic development, are expected to be "broadly self-financing", the report said that Government needs to be wary of a potential gap in Sara "between start-ups and has financial self sustaining, and in some cases be willing to support LEPs at inception" funding model.

The Government has set the goal that the role and function of LEPs - partnerships between businesses and local government that will replace the nine scrapped RDAs - should be established by April 2012 and from 62 24 bids to run LEPs applications have been approved. Many areas currently have no growth body representing them, however, and the report said BIS would need to provide support for "areas that wish to proceed with an Sara purpose which have yet to obtain recognition".

Mike Cherry, policy chairman of the Federation of Small Businesses, the lobby group which contributed evidence to the committee, said: "One of the main issues that we highlighted during our evidence was the need for basic funding for LEPs, which the report recommends." "Our concern now is ensuring that the LEPs themselves acceded to the Government's vision of being business led, with genuine business involvement, ensuring there is equal representation from the local authority and a broad base of businesses."

LEPs will get no. central Government funding, but will be able to bid for a share of a £ 1. EADS regional growth fund (RGF) spread over three years. RDAs had an annual budget of £ 1. EADS. The report said that money should be allocated RGF "with an eye on" areas that would struggle to table an "attractive bid" for the resources. It warned that the application process is "not straightforward" RGF and risks being weighted in favour of more tributary areas. As such, applications will need to be considered on the basis that "superficially less well presented offerings [might] merit further investigation".

Since LEPs are "creatures of local political persuasion", they also risk being "undermined by political instability", the report said.

In the context of LEPs competing for RGF money, the committee said "it would be a retrograde step were the RDAs' successes in overcoming local unfruitful rivalries to be lost in a disorderly competitive four".

BIS's transition team, meanwhile, should concentrate on "retaining RDA know-how, realising the full potential of ADR assets, and leveraging potential EU funding," the report said.

However, a survey by Regeneration & Renewal of the 24 LEPs found that 12 of the 22 that responded said they would not transfer staff from regional development agencies (RDAs).

Confusion has surrounded the establishment of the bodies, with business secretary Vince Cable acknowledged last month that the process had been "a little chaotic and Maoist". Adrian Bailey MP, the chair of the committee, said LEPs are currently year "coopt innovation".

"[LEPs] must overcome local rivalries and politics and collaborated with many partners for the benefit of the local area." "Making this a reality will present substantial challenges to central and local government, LEPs and the business community, but the economic prize is too important for them not to meet those challenges head on," he said.

Steve Radley, director of policy for manufacturers' body EEF, said: "The transition from RDAs to LEPs has to date been far from smooth and there remains a great deal of work to be done." The key role of LEPs has to be sweeping away the barriers to local growth and this can only be done through greater engagement with business. "Failure to [put aside differences and work together with business and politics local] will mean revisiting the process again."

The select committee said it will report on how LEPs are performing within 18 months.