Cities and local growth Contents

3Accountability, scrutiny and governance


19.The specific powers devolved as a result of devolution deals will vary across different parts of the country, and will require more effective local accountability arrangements to be put in place. The Department told us that is developing, in conjunction with local areas, a “clear accountability statement for every deal area, so that those of us who are accountable know what we are accountable for.”39 The Department stressed the importance of having properly working frameworks in order to maintain oversight of the varying arrangements. It further told us that it needs “to keep on top of” such frameworks and that it has “had to do more to make sure that those assurance frameworks are working properly.”40 The NAO reported considerable variation in the quality of LEPs’ assurance frameworks, which were not tested by the Department before allocating Growth Deal funding.41

20.Powers are also being transferred from a range of government departments and the Treasury told us, echoing what we heard from them in a previous evidence session, that each of these departments will need to set out how its own accountability system will be affected.42 HM Treasury told us that despite the overarching responsibility for the accountability framework for local government lying with the Department for Communities and Local Government, accounting officers of many other departments “also need to be clear about how they work in relation to an increasingly devolved world.”43

21.With greater devolution of the delivery of public services, the ability of Members of Parliament to scrutinise that delivery could be considerably reduced. We were concerned that the impact that these changes will have on parliamentary scrutiny, and how financial accountability will operate, has not been sufficiently considered or discussed with us or elsewhere in Parliament. The Department told us it would consider how best to engage Parliament on the new assurance framework being established and the changing scrutiny role it will consequently have.44 The Department also committed to engaging with the relevant Members of Parliament as implementation plans are being agreed for each deal to clarify “what is actually being devolved and what the future arrangements will be”.45

Local scrutiny

22.Where powers, responsibilities and funding are devolved from the centre, it is vital that there is adequate local scrutiny of these devolved activities. The Department told us that all combined authorities are required to have local scrutiny committees, which have an important function; however they do not have independent support and there is very little resource in many local authorities to provide independent evaluation and scrutiny.46 While there are arrangements in place for the independent external audit of local authorities, currently the role of local auditors is primarily to focus on individual bodies’ financial statements. Although local auditors do consider whether there are appropriate arrangements for securing value for money, they do not explicitly assess the value for money of devolved services.47

23.We heard from Professor Andy Pike that, with the abolition of the Audit Commission, there are currently limited institutional arrangements for assessing local value for money.48 Central government relies on the system of local accountability for assurance over the value for money of funding it gives local authorities. The Department’s core principles state that local authorities’ prime accountability is to their local electorate, and that local councillors are best placed to decide what is value for money locally.49 Given that services are being increasingly devolved to local areas, we raised concerns that there may be a gap in value for money scrutiny. It is not yet clear whether there will be institutional scrutiny of devolution deals at a sub-national level, or what form this might take.50 The Department told us that they will be putting forward proposals for local scrutiny, and we will be interested to see whether these proposals allay our concerns.51

LEP governance and transparency

24.LEPs are business-led partnerships between the private sector and local authorities, and are intended to steer growth locally strategically in local communities. However, the Federation of Small Businesses raised concerns with us that LEPs can be dominated by vested interests, and that there is insufficient involvement of the small business sector.52

25.As LEPs have the potential to give business leaders significant influence over decisions on how public money is used, it is essential that their decision-making is transparent to the public and free of perceived or actual conflicts of interest. In December 2014 government set out the standards of governance, transparency and decision-making that they expect of LEPs. This was an important step in safeguarding taxpayers’ money, particularly in light of the sums involved in the recently negotiated Growth Deals and the increase in the scale of LEP activity. However, the Department did not test whether LEPs were meeting the required standards before the first round of Growth Deals was paid out to them, and the NAO’s review showed there are significant gaps in LEPs’ compliance with the standards expected.53

26.The NAO’s review shows, for example, that 42% of LEPs do not publish a register of interest, and 16% do not even publish a conflict of interest policy. The Department told us that many LEPs do have registers of interest but that these may not be published.54 It is therefore unclear how the public are supposed to take assurance that LEP decisions are being made with probity. Furthermore, the Federation of Small Business told us that there is a lack of rigour in the production of annual accounts by LEPs.55 The NAO reported that it is not always easy for the public to see where and how LEPs are spending public funds given the variation in how LEPs account for and present this expenditure, which also makes it difficult to draw comparisons across LEPs nationally.56 The Department told us that they have now written out to LEPs in cases where they have not met the necessary standards.57 Clearly though, if government is going to set standards for LEPs they should ensure that these standards are being met before funding is paid out to them. We will expect to see greater oversight by the Department in future.

40 Q 45

41 C&AG’s report, Local Enterprise Partnerships, para 3.16, 3.17

42 Q 122; Public Accounts Committee, Accountability for taxpayers’ money—oral evidence, HC 732, 1 March 2016.

49 C&AG’s Report, Local government funding: Assurance to Parliament, HC 174, 2014–15

53 C&AG’s Report, Local Enterprise Partnerships, paras 3.14 to 3.17 and Figure 17

54 135; C&AG’s Report, Local Enterprise Partnerships, Figure 17

56 C&AG’s Report, Local Enterprise Partnerships, Figure 18 and para 3.20

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27 June 2016