The New Local Enterprise Partnerships: An Initial Assessment - Business, Innovation and Skills Committee Contents


7  Powers and accountability

Challenges and opportunities in achieving accountable and fully functioning bodies

135. Effective accountability, performance management and political stability will all be key challenges to LEPs. Evidence to the inquiry included many well considered suggestions for ensuring good governance of LEPs, including involving the further and higher education sectors as well as voluntary and social enterprise bodies. The White Paper goes some way to addressing these issues, stating that LEPs:

will want to work closely with universities, further education colleges and other key economic stakeholders. This includes social and community enterprises, which play an important role in creating local economic growth through providing jobs and training, delivering services and helping create community wealth in some of the most deprived parts of the country.[203]

136. The CPRE observed that voluntary and environmental sector involvement would have the added benefit of providing direct connections back to the local communities and organisations as well as improving transparency, accountability and quality of decision making.[204]

137. Several organisations highlighted the importance of establishing mechanisms to avoid business conflicts of interest within LEPs, while maintaining the objective of strong LEP business leadership. Suggestions on how to manage such potential conflicts included such measures as adopting limited terms for LEP board members, and not allowing board members to decide on projects in which they are themselves involved as potential contractors.[205]

138. There are three other particular issues in the area of effective LEP function on which we wish to comment: the need for appropriate powers, that of accountability and performance management, and that of political stability.

The need for appropriate powers

139. The White Paper makes clear that LEPs will not be defined in legislation, although it observes they might well require a legal personality.[206] However, it does prescribe a set of key roles for local authorities in supporting growth.[207] These include leadership and coordination, supporting growth and development through supply of land, using significant land assets to leverage private funding, influencing investment decisions via the use of statutory powers, particularly the planning system, supporting local infrastructure, and others.

140. There was a range of opinion from those who submitted evidence on whether LEPs should have statutory powers over planning. The FSB thought that power to use planning (and licensing) levers might be a vital part of the LEP armoury given their limited spending power.[208] Centre for Cities was also in favour and argued that LEPs should be able to promulgate compulsory purchase powers through their local authorities.[209] CEDOS/ADEPT agreed, believing that the loss of the current RDA powers of compulsory purchase would be a retrograde step. Both the IoD and Cambridgeshire disagreed, believing that statutory planning powers should remain with local authorities.[210] In any event, as the TUC said, there needs to be some clarity around this. In the meantime, we are pleased that the Government has agreed with the suggestion of a duty of cooperation in planning matters.[211]

141. There was no division of opinion, however, on the need for LEPs to be given the power and recognition they need to do their job, both in terms of downward devolution of power from Whitehall and in determining local authority policy. Many of those who submitted evidence to us warned that without adequate power to influence local authorities LEPs ran the risk of becoming nothing more than talking shops.

142. The need for devolution of power to LEPs from central government was articulated by Centre for Cities, who pointed to previous failure to devolve powers to multi-area agreements. Furthermore, there was a general agreement that Departments across Whitehall needed to commit to supporting LEPs. Yorkshire & Humber Chambers of Commerce summed things up pragmatically in this way:

    It will be difficult for LEPs to achieve their aims unless they have real decision making and funding powers. This doesn't necessarily mean significant central funding (which we know simply isn't there) but LEPs must have some tools to achieve their aims. Otherwise they risk talking about the skills, transport or planning issues which are barriers to business growth without being able to do anything serious to address the barriers. The risk is they are merely 'big LSPs' or grandly titled multi-area agreements. 'Talking shops' will not sustain the interest of serious business leaders.[212]

143. It also highlighted the wide range of relationships that a LEP could develop Government Departments:

    DWP could work with LEPs to make sure employment programmes reflect local circumstances (although LEPs should be focused on creating jobs rather than simply on worklessness). DfE would have a common interest with LEPs on 14-19 skills or enterprise education. DCMS might want to work with LEPs on the local tourism agenda which is particularly important in parts of our region such as the Yorkshire coast, moors and dales. Treasury could support LEPs by giving them the financial flexibility and funding mechanisms to implement their plans. BIS will share LEPs' ambitions to promote business start-ups and perhaps other functions it has said it will lead nationally. DfT have a key role to play in working with LEPs to match local and strategic transport priorities. This range of activities underlines the importance of a variety of government departments buying into the LEP model-not just CLG.[213]

144. Yorkshire & Humber Chambers of Commerce concluded that LEPs would not succeed without central Government as a committed partner, and recommended that the Government consider appointing a Minister or a senior civil servant to act as the "primary link and point of liaison between the LEP and the centre".[214]

145. The IPPR North, in its paper Four Tests for Local Enterprise Partnerships took a similar view:

    The role of central government should be to respond to the aspirations of LEPs, removing barriers to the achievement of their economic vision. Where they are able to evidence the need for increased power or control of specific functions, central government's job should be to deliver it. But for this to work it is essential that all departments are fully signed up to making LEPs work. Past initiatives, such as multi area agreements, have fallen at the hurdle of drawing powers down from central government, with some departments more committed to devolution than others (Russell 2010). A champion is needed to lead the process in Whitehall, encouraging and challenging departments to go further and faster. Given the primary remit for LEPs is economic growth, we suggest the Department for Business Innovation and Skills is well placed to play this role.[215]

146. LEPs will need to have clear powers to influence and determine local authority policy or risk becoming nothing more than talking shops. Such powers might usefully be set out in a memorandum of understanding between the LEP and its partner local authorities. While we understand the Government's reluctance to set out a statutory framework for LEPs, we believe that agreement on terms of reference for how such relationships will be built would encourage sharing of best practice to the benefit of both business and local authorities.

147. It is vital that all relevant Government Departments fully support LEPs and, where appropriate, devolve power to them. We recommend that the Government consider directing Departments to prepare memoranda of understanding between themselves and LEPs setting out a commitment to devolved power. Publication of those memoranda would be an excellent first step on the road towards greater consistency in relations between Departments and would have the potential to incentivise LEPs to work for greater devolution of power.

Accountability

148. At the start of our Report we refer to the problems faced by RDAs in relation to accountability which together with the value for money offered by the RDAs has been a matter of contention. Shortcomings in RDA performance were identified in the audits undertaken by PricewaterhouseCoopers and by the National Audit Office,[216] in particular in respect of the RDAs' initial slowness in evaluating the results of their investments. The RDAs went some way to addressing these shortcomings and it would be unfortunate if the lessons learned were not taken on board by LEPs.

149. To permit that to happen, and to allow proper assessment of LEPs' relative contributions, there will need to be both proper local economic intelligence and the means to calibrate LEP performances against each other by way of consistent nationally coordinated data. The SMMT emphasised this need for national metrics,[217] while the IoD told us that it would be a "major schoolboy error" were that not to be the case.[218] The NAO told us it expected LEPs to be subject to a properly financed audit process, saying: "We would obviously expect to see [LEPs] putting resources aside to develop performance frameworks."[219]

150. When we asked the Minister about this, he told us that accountability for LEP spending of central Government funds would be managed as for any other arrangement in terms of public accountability, while partnerships would be accountable for their expenditure of local resources "in the normal way".[220] However, he admitted that the decision on the mechanism for assessing value for money had not yet been taken.[221] That said, the Minister confirmed that the Government would not impose "some sort of heavy-handed, detailed central accountancy process."[222] The abolition of the Audit Commission has created the potential for a new accountability gap at the local level, particularly as there is no organisation to take on a strategic role of auditing LEPs and their use of public funds.

151. A system as innovative as that of Local Enterprise Partnerships must be subject to proper performance and value for money review. To achieve that, it is critical that the Government put in place measures for auditing the performance of LEPs based on consistent data measures and criteria. We strongly discourage the Government from recognising any LEP without insisting on full local scrutiny—including by publishing of accounts and minutes where appropriate and by giving local stakeholders the means to question LEP boards. Furthermore, where LEPs are in receipt of public funds we recommend that they be subject to an independent and transparent auditing process meeting the minimum standards required for NDPBs.

Stability

152. It is clear from press reports, and from the fact that substantial areas of the country are yet to have a LEP approved, that achieving local consensus around the form of LEPs has in many cases involved significant negotiation. This was not helped by the initial uncertainty around whether county-based bids would be accepted, but it has also been a symptom of local politics—particularly in areas such as Lancashire, the West Midlands, Humberside and the South West. Furthermore, it is clear to us from the evidence of LEP bidders that partners in some bids—including successful ones—had their eyes on several possible outcomes. There would have been many ways to cut the LEP cake, and the division that will emerge, while no less valid for it, is clearly one possibility only, with all that that means in terms of possible future uncertainty.

153. This risk of damage to LEPs effectiveness by 'politicking' was predicted in evidence to us from several bodies. The Regional Studies Association rightly highlighted the problems in the West Midlands.[223] South East Chambers of Commerce told us that local political tensions were in some areas preventing a sensible debate, [224] while the SMMT referred to the risk of 'turf wars'.[225] The British Venture Capital Association spoke of potential political bun fights which the RDAs had largely avoided through providing a politically neutral space in which business and politicians could come together.[226]

154. There is a risk that the LEPs, while avoiding the arbitrary borderlines of the RDA structure, may instead create a constantly shifting landscape in which the starting framework is already the result of a somewhat arbitrary—albeit genuinely felt—alliances. These alliances may come under pressure as local elections results disrupt the initial partnership agreement. The Federation of Small Businesses recognised this, stressing that LEPs must be sustainable in the long term, surviving political change at both local and national level.[227]

155. There are two ways in which this risk may be avoided. First, while collaborations between LEPs will of necessity need to evolve, businesses and LEPs themselves must resist the temptation for LEPs to be constantly shape shifting. While it is inevitable that some LEPs will be less successful and might therefore want to dissolve and reform, there should be an expectation that, once recognised, a LEP will in most cases retain the same form and coverage for a sustained period, and it could be built into LEPs' constitutions that any shift away from that would require more than a simple majority decision. Secondly, Government must resist and preferably devolve away from itself the power to recognise new LEP patterns merely for reasons of political expediency—a difficult step, but a necessary one for its LEP project to remain credible.

156. LEPs will need to develop ways to meet the challenge of changes to the local and national political landscape. In order to facilitate this, we recommend that the Government consider the establishment of an independent process for validating any changes in LEP boundaries.


203   See paragraph 2.8 Back

204   Ev w27, paragraph 18 and 22 Back

205   Q 112 [Marshall] Back

206   Local Growth White Paper, paragraph 2.9. Back

207   White Paper, Box 2.A. Back

208   Ev 127, paragraph 8 Back

209   Ev w36, page 4 Back

210   Ev 141, paragraph 1.35 and Ev 108, paragraph 3.6 Back

211   Local Growth White Paper, paragraph 3.20. Back

212   Ev w301, paragraph 20 Back

213   Ibid., paragraph 13 Back

214   Ev w300, paragraph 14 Back

215   See section one, paragraph 3 Back

216   PricewaterhouseCoopers report, Impact of RDA Spending, March 2009; National Audit Office report, Regenerating the English Regions, March 2010. Back

217   Ev w217, paragraph 9 Back

218   Q 93 [Ehmann] Back

219   Q 67 [Corner] Back

220   Q 282 Back

221   Q 285 Back

222   Q 282 Back

223   Ev w192 Back

224   Ev w220 Back

225   Ev w218, paragraph 16 Back

226   Ev w19 Back

227   Ev 126 Back


 
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Prepared 9 December 2010