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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