Since 2008, European Regional Development Fund (ERDF) cash has been administered by the regional development agencies (RDAs), which will be replaced by LEPs after 2012.

The original letter from Eric Pickles and Vince Cable inviting councils to submit expressions of interest in setting up LEPs did not mention any role in distributing regional aid. But Pickles has now said that LEPs would be the coalition's "main vehicle" for distributing ERDF, although he added that the partnerships would have less autonomy over managing and allocating grants than the RDAs currently do.

Pickles said: "The RDAs made a mess of EU funding and had no idea how to handle it. As a result, Whitehall has promised the European Commission that it will tighten up the processes around how EU funds, such as the ERDF fund, are distributed across the country. Having said that, the LEPs will, of course, be our main vehicle for passing down European money."

The communities secretary also told a fringe meeting that LEPs could be handed responsibility for inward investment - a function that the letter from Pickles and Cable said would be led nationally.

Louise Goldsmith, the Conservative leader of West Sussex County Council, which is leading on preparations for a proposed Coast to Coast LEP that would take in West Sussex, Brighton and Hove, Gatwick Diamond and Croydon in south London [see earlier story], said: "We are well advanced with preparations for our LEP and would be thrilled with these extra powers. We have a number of potential models in place and would be able to cope with any extra staffing that additional powers would require."

The specific arrangements for ERDF funding would be set out in a white paper on sub-national growth, due to be published this month.

But the European Commission's Directorate General of Regional Policy warned that any changes to existing arrangements would take time to implement. A spokesperson said: "The European Commission will have to establish if further work is required in terms of the compliance of any new management and control systems with the applicable regulations."

ECONOMIC PARTNERSHIP COMMENT

The new power granted to LEPs could be both a blessing and a curse. Certainly the control of EU funding adds legitimacy to the LEPs and will add to their ability to influence strategy but judging from Pickles' comments such control will be somewhat less than that enjoyed by the RDAs.

The administration of ERDF funding is, as with many things EU, highly bureaucratic and time consuming and requires a degree of expertise that the RDAs had built up over many years. There is a danger that this expertise will be lost with the demise of the RDAs in 2012. In the Coast to Capital LEP the councils involved will undoubtedly be able to handle the EU funds, but which one?