Vince Cable savages Lord Heseltine's plan to hand region 'spending pots'

Ahead of a crucial decision, Mr Cable said ‘local enterprise partnerships’ (LEPs) were simply not capable of handling huge sums of public money, as the Tory peer had proposed.

The Business Secretary pointed to key spending areas in his own department – innovation funds and skills budgets – that must be administered from Whitehall, to ensure value for money.

And he criticised Lord Heseltine for not being truly radical by proposing tax-and-borrowing powers for local councils, instead of simply a different “carve up” of existing spending Speaking to The Northern Echo at Westminster, Dr Cable said, of the £70bn Heseltine plan: “We were never going to go down that road - and we won’t be going down that road.

“There is a genuine concern about local enterprise partnerships. Hardly any of them come up to me and say ‘we would like billions more money to spend".

“That’s not the way they think, or operate. It’s a false premise. There is a capacity issue – they are quite small groups – and there’s an accountability issue.”

Mr Cable said LEPs were “five, six, or seven business people on the board”, adding: “You can’t hand over large chunks of public money, with limited controls, into that kind of structure.”

However, the Business Secretary said some LEPs were "dynamic" - while others were struggling to get going - picking out Tees Valley as one of the best.

The key - given the lack of funds available - was strong, "energetic" leadership and a willingness for business leaders and local councils to work together.

He said: "Teesside is very good. They hated being under the regional development agency, they felt they were neglected, they already had their own organisation and they immediately got to work.

"They already had something to work with and they have a lot of commitment. That meant they were out of the blocks very early with bids for enterprise zones and to the regional growth fund."

The criticism comes just weeks before Chancellor George Osborne is due to announce the size of the ‘spending pots’ – having accepted the Heseltine report in principle.

And it appeared to lay bare what the former Conservative deputy prime minister himself called a “battle” within Whitehall, to cling on to departmental budgets.

In October, Lord Heseltine – in a study requested by David Cameron – called for LEPs to control budgets worth £17.5bn-a-year across England, to end decades of over-centralisation.

Departments would be forced to hand over all funding streams that support growth, delivering annual hundreds of millions of pounds to LEPs that put in viable bids.

Lord Heseltine vowed to bring back “wealth creators” in the regions, saying: “London didn't make this country - the provincial cities were a vital ingredient.”

The proposals immediately provoked opposition within government, which stripped the regions of powers when it axed the regional development agencies (RDAs).

However, Mr Osborne is poised to create limited ‘spending pots’ in his June spending review, to start in 2015 – and Dr Cable is the first Cabinet minister to criticise the plan openly.

Giving the example of innovation funds, he said: “We don’t want 20 nano-technology centres springing up around the country, competing with each other and requesting money.”

And, arguing that it was better for firms to bid for training budgets, he added: “We don’t want the re-creation of local sector-skills councils, or whatever we used to call them.”

Dr Cable said he believed the government would instead follow the route of expanding ‘City Deals’ – devolution to groups of elected local authorities – both in scope and number.

Arguing for councils to be able to raise taxes and borrow funds from the money markets, Dr Cable said: “If I was doing a criticism of Michael Heseltine, I would say he wasn’t radical enough.”