Cities and local growth Contents

1Policy coherence


1.On the basis of a Report by the Comptroller and Auditor General, we took evidence from the Department for Communities and Local Government (the Department) and HM Treasury on English devolution deals and Local Enterprise Partnerships.1 We also took evidence from Lord Porter, Chair of the Local Government Association, Professor Andy Pike of the University of Newcastle and Martin McTague, National Policy Director of the Federation of Small Businesses.

2.The Government has recently announced a series of devolution deals between central government and local areas in England. To date, ten bespoke devolution deals have been agreed. All of these deals transfer powers, funding and accountability for policies and functions previously undertaken by central government. The Cities and Local Growth Unit (a joint unit of the Department for Communities and Local Government and the Department for Business, Innovation & Skills) and HM Treasury jointly oversee and co-ordinate government’s devolution agenda, and are responsible for coordinating the negotiation, agreement and implementation of devolution deals on behalf of central government. These deals are the latest in a range of initiatives and programmes designed to support localism and decentralisation, which include Local Enterprise Partnerships and the Local Growth Fund.2

3.Following the abolition of Regional Development Agencies in 2010, 39 Local Enterprise Partnerships (LEPs) were established as strategic partnerships to bring together the public and private sector to identify economic priorities in their local areas. Each LEP is designed to represent a functional economic area. In 2014 it was announced that LEPs would be responsible for overseeing locally negotiated Growth Deals from 2015–16 to 2020–21, funded from the Government’s £12 billion Local Growth Fund. LEPs are accountable to a nominated local authority, and have signed up to local assurance frameworks that set out arrangements for ensuring transparency, governance and value for money.3

4.Devolution is an evolving policy area and the deals announced so far are still being implemented. However, these new arrangements mean significant changes to how public services are delivered and to accountability for large amounts of taxpayers’ money. We have examined matters at this point so that the government can take account of our recommendations at a relatively early stage of implementation.

The objectives of devolution

5.The Department made clear to us that it has been a deliberate policy to not set out a clear statement of specific objectives that it is trying to achieve through devolution deals, and not to have a national framework for what is on offer to local government.4 The Department told us that its primary policy intentions with devolution deals are the introduction of directly elected mayors to improve local accountability, economic growth, and public service reform. However, we also heard from Professor Pike that the evidence that other devolution exercises have improved public service outcomes or economic growth is “extremely mixed”.5

6.These broad objectives are not specific or time-bound and the Government has not yet set out the total spending commitments and changes that will result from the agreement of devolution deals. Some of the details of how and when powers will be transferred to mayors are also still being worked through.6

7.An independent panel is being jointly commissioned by local area and central government to assess the use and impact of the additional funding being provided by central government to areas with devolution deals. The Department and HM Treasury anticipate that the five year reviews carried out by the panel will be able to measure the economic growth resulting from these policies and provide an assessment of their success.7 However, both departments were unable to provide assurance that central government will be able to identify quickly where things are going wrong and take action within these five year periods. The Department told us that there will be a reliance on local scrutiny functions and individual frameworks being put in place by a number of departments, each of which may well be slightly different.8

Bottom up or top down?

8.Although the Department told us that its approach to devolving powers is “bottom up,” it is clear that certain aspects of devolution are very much driven from the centre. The Department told us that different areas are able to choose the powers or budgets that they wish to be devolved, and to move at different speeds towards devolution. For the Department, the aim of this approach is to allow for innovation by local areas and to allow them to move at their own pace.9 When we challenged the Department on whether the process is genuinely ‘bottom up’ and led by local areas, it responded that it is not forcing devolution deals on anyone. Despite this, it is clear that some local areas perceive the mayoral model to be a pre-condition of devolution deals even in cases where they do not feel that this is suited to their local needs.10 This presents a risk that there will be low election turnouts and that local mayors will lack legitimacy as a result.11 Moreover, the timing of devolution deal announcements is in line with central government milestones, such as spending reviews and budgets, which further suggests that these deals are running to a centrally, rather than locally, determined framework.12

9.While each devolution deal has bespoke features, there are several areas of commonality in the offers made in the ten devolution deals agreed so far. For example, all the deals include agreements for devolved responsibilities in areas of local transport, business support and further education.13 However, government has not made it clear in the first instance what core expectations they have of local areas in their bids and equally what government is able or unable to offer as part of the deal negotiation.14 For example, local proposals on school-age education have not been accepted by central government.15 For future deals it would be helpful to local areas to have this information transparently and up front so that they are able to focus their bids more effectively.16

Financial implications

10.As part of all of the devolution deals agreed so far, except that with Cornwall, HM Treasury has provided new funding for investment in economic growth. In each case, the Treasury has committed to a 30-year funding stream, commonly for £30 million a year, which will be subject to an initial assurance framework being put in place by local areas and five-yearly assessments to confirm whether the spending has contributed to national economic growth. However, the sums agreed within the deals have not been based on any robust assessment of each area’s local needs.17 HM Treasury acknowledged that many of these totals for additional investment funding were arrived at through local areas wanting equivalent funding to those deals previously agreed.18 As a result the per capita funding ranges from £11 a year in the Greater Manchester deal to £27 a year in the West of England deal.19

11.We were concerned about the general poor transparency across government of per capita spending by area. It is a very useful indicator that can be easily understood by both members of the public and by Members of Parliament. We asked what data is available and the Department accepted that “it is a fair challenge as to whether we might need to improve what is available in these sorts of areas”.20

12.In the March 2016 Budget, the Government announced, for the first six mayoral devolution deals, the combination of a number of funding streams into ‘single pots’. The single pots initially comprise three funding streams: the additional investment funding; consolidated transport funding; and Local Growth Fund allocations. The government plans to incorporate other funding streams in the future. The six single pots agreed so far total £2.86 billion over five years, but an area breakdown, other than for the additional investment funding element, has not yet been published.21 The Treasury told us that local areas will be asked to develop assurance frameworks to provide assurance to central government that the single pot funding is spent properly and provides value for money.22 These will be subject to approval by the Department for Communities and Local Government before the additional investment funding is disbursed.23

1 C&AG’s Report, English devolution deals, Session 2015–16, HC 948, 20 April 2016 and C&AG’s Report, Local Enterprise Partnerships, Session 2015–16, HC 887, 23 March 2016.

2 C&AG’s Report, English devolution deals, paras 1, 2, 4

3 C&AG’s Report, Local Enterprise Partnerships, paras 2, 3, 20

5 Q 9; Professor Andy Pike, University of Newcastle (LEP0007)

12 C&AG’s Report, English devolution deals, para 2.4

13 C&AG’s Report, English devolution deals, para 8

15 C&AG’s Report, English devolution deals, para 8

17 C&AG’s Report, English devolution deals, paras 1.15, 1.16

19 C&AG’s Report, English devolution deals, Figure 6

21 C&AG’s Report, English devolution deals, para 1.14

23 C&AG’s Report, English devolution deals, para 1.14

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27 June 2016