Cluster Strategies - Highlands and Islands Enterprise

CLUSTER STRATEGIES

Highlands and Islands Enterprise

(from Danny Mackinnon, 2000)

The HIE / LEC network came into operation in 1991, taking over from the HIDB. The change introduced substantial changes to the structure and practice of regional economic development by establishing LECs as local employer-led bodies. Members of the LEC boards are appointed on the basis of their knowledge/experience rather than as representatives of any particular organisation or interest. Two thirds of the LEC board must be drawn from the private sector.

Programme delivery is decentralised from HIE and SE through annual contracts with the LECs, but they remain responsible for several key functions, including: monitoring LEC's performances and outputs; formulating regional strategies; developing sectoral initiatives across their regions, and attracting inward investment.

There was some tension in that business leaders in the LECs were led to expect freedom to allocate resources according to local priorities without central interference, whereas in fact there is considerable central control over distribution of public money.

LECs are private companies limited by guarantee but are largely dependent on the state for funding. HIE submits a bid for funding in the form of an Operating Plan to the Scottish Executive detailing how the money will be spent in terms of specific programmes and initiatives. The SE then allocates funding from its block grant.

The methods HIE uses to allocate funding to LECs vary across 7 budget blocks. These budget blocks were inherited from the HIDB. Block 1 covers business development through the Finance for Business programme, property and projects; Block 2, the enterprise programmes inherited from the Training Agency; Block 3, environmental renewal; Block 4, youth training, Block 5, adult training; Block 6, community development, and Block 7, operating costs.

While the budgets for youth and adult training are determined by national formulas, Block 1 funding ( normally over 50% of LEC's budgets) is allocated by HIE according to a formula share method based on population and economic need. While LECs are able to determine their own priorities within funding blocks, they cannot vire anything more than a minimal sum between blocks. For example central rules determining funding levels for national training programmes constrain LECs ability to provide training schemes tailored to the needs of local business.

LECs dependence on HIE for permission to vire funds is indicative of the latter's financial control over LECs. Crucially, HIE's ability to gather and compare information gives it a knowledge of LEC performance and local conditions across the Highlands which individual LECs lack, thereby enabling it to