Cities and local growth Contents

Conclusions and recommendations

1.Government has not made the objectives of devolution sufficiently clear. It is therefore not clear how they will judge success and measure progress. The experience of devolution in England and elsewhere provides inconclusive evidence for whether it results in economic growth and improved outcomes from public services. Given that these new policies are untested, it is vital that systems and structures to establish whether devolution is producing the desired effects are put in place as soon as possible. The Department, together with local areas, is establishing five-year reviews to assess some elements of the devolution deals. However, outside of these it is not yet clear how quickly central government would be able to identify if and where things are going wrong and at what point it would intervene to resolve any issues.

Recommendation: Government should be specific and clear about what it is trying to achieve by devolving services to local areas. It should then set out how it will monitor progress against these goals. It should also be clear on where it believes that outcomes are a matter for local leaders to decide and where centrally imposed targets are more appropriate.

2.The experience of local areas in negotiating devolution deals has not been consistent with government’s intended ‘bottom up’ approach. The rhetoric surrounding devolution is that local areas are the driving force behind the deals. However in practice central government is stipulating certain requirements, such as around local governance, without making them sufficiently clear up front. For example, some local areas have expressed dissatisfaction that they have to adopt a mayoral model as a pre-condition of a devolution deal, even in cases where they do not think the model appropriate to local needs. The timing of devolution deal announcements has been driven by central government milestones such as spending reviews and budgets. Central government has not set out clearly what is required from local areas in putting forward devolution proposals, and equally what is and is not on offer from central government in return. There are unresolved tensions between a stated wish to let local areas put together innovative arrangements and a central desire to impose particular governance models.

Recommendation: Government needs to be clearer with local areas what is and what is not on offer; and what is mandatory as part of devolution deals. Government should also listen to local areas about their particular needs to avoid a ‘one size fits all’ model being imposed.

3.The full financial implications of devolution deals are not yet clear. The devolution deals include new investment funding which will be pooled together with local growth fund allocations and consolidated transport funding into ‘single pots’ for local areas. Although government announced in the March 2016 Budget that the initial single pots for six of the areas with devolution deals would total £2.86 billion over five years, we have yet to see an area breakdown other than for the additional investment funding element. The additional investment funding, the funding most associated with devolution deals, appears to have been more a product of local areas seeking to achieve parity with each other than a structured assessment of each area’s local needs. There is generally poor transparency of per capita spending by area across government, which means it is difficult to put into context, and therefore form any assessment of the appropriateness of, the differing funding amounts agreed with local areas in devolution deals and growth deals.

Recommendation: As the full financial implications of devolution deals emerge, government should ensure that they are presented transparently in a way that can be compared between areas, including on a per capita basis.

4.The scale of devolution deals and the pace of the implementation is extremely challenging. Government has set an ambitious timetable for local areas and itself in order for secondary legislation to be passed by November 2016, and therefore allow sufficient time for setting up the mayoral elections in May 2017. In order to meet this timetable, local areas need to publish and consult on their governance plans and final geographical composition over the summer. Any delay in this process, or in the passage of the required secondary legislation through Parliament, could put the proposed May 2017 elections at risk. The speed of the process so far has already led to a lack of meaningful consultation with stakeholders, including local MPs, councils and voters. Government must be mindful that once the a system is in place, unpicking it would be complex and expensive for local areas and confusing for citizens.

Recommendation: Government should ensure that the timetable remains feasible and that it has clear contingency plans for potential delays in local areas or the legislative process.

5.It is not clear that combined authorities, LEPs and local partners have sufficient capacity and capability. The pace of the change in the role and remit of both LEPs and combined authorities has been rapid. LEPs were established as non-resource intensive strategic partnerships, but are now responsible for overseeing delivery of the £12 billion Local Growth Fund, representing a significant increase in their responsibilities and influence over spending locally. There is varying capacity and capability across the LEPs, and a large number of them do not feel that they have sufficient resources to meet government’s expectations or governance requirements. They are also relying on local authorities for staff and expertise at a time when local authorities are themselves trying to cope with severe financial constraints. Combined authorities are also now being given additional responsibilities which in many cases involves pooling local resource: a significant challenge in areas where there is a limited track record of joint working or combined governance.

Recommendation: As part of the negotiation of the next round of devolution deals and growth deals, the Department should perform a structured assessment of local capacity at LEP and combined authority level.

6.The Government has not thought through the implications of devolution for central government departments. The devolution of functions from central to local government has potentially significant implications for the required skills and numbers of staff in central government, as well as in local areas. However, government has not yet taken a civil service-wide view of the possible impact of devolution on their workforce needs. There would be an expectation from the taxpayer that in transferring funding and responsibilities to the local level, the headcount of central government would consequently fall. The types of skills needed to manage the new arrangements are also likely to be different. As each devolution deal is bespoke, there are differing functions being transferred to each area and to varying degrees, and central government will need to take account of this variety when carrying out its workforce planning.

Recommendation: Government should have a clear idea of how devolution will impact on departments’ staffing and skills requirements, feeding this into the upcoming Civil Service Workforce Strategy.

7.Plans for proper accountability to the taxpayer at a central, local and ultimately parliamentary level are not yet in place. While the specific powers devolved or delegated to local government will vary across different parts of the country, in all cases devolution deals will require effective local accountability arrangements to be put in place. Central government will also need to provide assurance to Parliament that the responsibilities transferred are being implemented effectively and that the taxpayer is getting value for money in return for the monies invested. We heard that the Department is developing, in conjunction with local areas, an accountability statement for every deal area, so that it is clear who is accountable for what. Powers are also being transferred from a range of government departments, and each of these departments will need to set out how its own accountability system will be affected. Despite these changes meaning that Parliament’s oversight of significant elements of public spending may be considerably reduced, there has not been any consultation with Parliament to discuss the matter.

Recommendation: Government must clearly set out accountability processes and relationships at all levels. It should share draft accountability statements with the Committee before they are finalised.

8.We are not confident that existing arrangements for the scrutiny at local level of devolved functions are either robust enough or well supported. Robust and independent scrutiny of the value for money of devolved activities is essential to safeguarding taxpayers’ money, particularly given the abolition of the Audit Commission. Local scrutiny committees are an important mechanism; however, given resource constraints and the absence of independent support there is a limit to what they can realistically oversee. Currently, local auditors focus on individual bodies’ financial statements and arrangements for securing value for money, rather than assessing value for money itself. It is not yet clear whether there will be any sort of independent institutional scrutiny of devolution deals as a whole, or what form this might take. As more powers, funding and responsibilities are devolved to the local level, we are therefore concerned that a gap in the scrutiny of value for money might be appearing.

Recommendation: Government should set out by November 2016 its plans for how it will ensure that local scrutiny of devolved functions and funding will be both robust and well supported.

9.It is alarming that LEPs are not meeting basic standards of governance and transparency, such as disclosing conflicts of interest to the public. LEPs are led by the private sector, and stakeholders have raised concerns that they are dominated by vested interests that do not properly represent their business communities. There is a disconnect between decisions being made by local business leaders and accountability working via local authorities. It is therefore crucial that LEPs demonstrate a high standard of governance and transparency over decision making, at least equal to the minimum standards set out by government in the assurance framework. It is of great concern that many LEPs appear not be meeting these minimum standards. The scale of LEP activity and the sums involved necessitate that LEPs and central government be pro-active in assuring the public that decisions are made with complete probity. The fact that 42% of LEPs do not publish a register of interests is clearly a risk to ensuring that decisions are made free from any actual or perceived conflicts of interest. The varying presentation and detail of financial information across LEPs also makes it difficult to draw meaningful conclusions or make comparisons across LEPs on how they spend public money.

Recommendation: The Department should enforce the existing standards of transparency, governance and scrutiny before allocating future funding to LEPs. LEPs themselves also need to be more transparent to the public by, for example, publishing financial information.

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27 June 2016