12.As LEPs were formed on a voluntary basis and asked to operate across functional economic areas, many overlapped. In 2018 the Department identified 20 LEPs with overlapping boundaries, out of a total of 38. Since then, 11 LEPs have agreed to resolve their boundary overlaps, leaving nine that have found it more challenging to arrive at a resolution. The Department acknowledged that “retaining overlaps dilutes accountability and responsibility for setting strategies for places”.
13.The Department expects that remaining geographic overlaps will be resolved by April 2020 and says it is “working very actively” with the remaining LEPs to agree a resolution. The Minister has written to the LEPs with unresolved boundary issues to reach agreement on a suitable way forward and Departmental officials expect to meet with local representatives in June. The Department did not offer further detail on how it plans to achieve the resolution and to what timeframe.
14.The Department stated that capacity funding has already been withheld from those LEPs who have not yet resolved their geographic boundaries in the hope this will encourage a speedy resolution. The Department told us that where LEPs fail to agree on a local resolution, Ministers could impose one, though this would be less desirable given the intention of allowing local areas to determine what works best for them. Any future funding LEPs receive through the UK Shared Prosperity Fund will depend on whether they have implemented all the recommendations of the LEP review, which includes agreeing geographic boundaries.
15.The Department set an expectation that all LEP boards should have a maximum of 20 people; for women to make up at least one-third of LEP boards by April 2020; and for them to achieve gender parity by 2023. As of February 2019, the number of LEP board members ranged from 10 to 31 members, with an average of 18. On average, 27% of LEP board members are female. The Department has no formal role in deciding who can become a LEP board member. LEPs are required to publish data on the representation of their boards which is discussed during individual LEP performance reviews with the Department.
16.The Department told us that it prioritised gender diversity and set the target for gender balance on LEP boards because there was an obvious lack of diversity on LEP boards. It recognised that achieving this target will be challenging for some LEPs to achieve. The Department has also stipulated that LEP boards have at least one member from the small business community, but it has not examined how representative LEPs are of their local business communities more broadly. The Department does not require LEPs to be representative of local businesses in the area though it told us it expects that all LEPs should include one small to medium sized business representative on the board.
17.The Department considers it is important LEP boards are reflective of the economic areas they represent. However, it does not plan on doing a comparison between the business make-up of each area and the representation on individual LEP boards despite accepting that there could be merit in completing this exercise. The Department stated that, as non-statutory bodies, LEPs are not resourced sufficiently to respond to extremely high levels of scrutiny and, as such, the Department needs to prioritise what it asks LEPs to commit to.
18.LEPs have underspent their Local Growth Fund allocations by over £1.1 billion in the three years to the end of 2017–18. Against the total award for the first tranche of Growth Deals (2015 to 2017), LEPs underspent £789.1 million (an average underspend of £20.2 million per LEP). In the second tranche of Growth Deals for the period 2017–18, LEPs underspent by £333.1 million (an average underspend of £8.8 million per LEP). The Department says that LEPs can use funding flexibilities to fund their long-term projects by reallocating funding locally and then utilising it for projects at a future date. The Department forecasts that LEPs will underspend their total allocations through Growth Deals by £255.9 million by 2020–21.
19.The Department told us that LEPs have underspent their funding because it has taken them time to develop their capacity to bring forward and manage capital projects. It acknowledged that a low proportion of revenue funding to support these capital projects creates a challenge for LEPs, but it is not clear to what extent this is contributing to LEPs’ underspend. The Department has done no systematic analysis to understand LEPs’ capacity. It told us it was awaiting the results of research it had recently commissioned to assess LEPs capacity and capability, to get more information on whether or not LEPs and their accountable-body local authorities have really got the resource they need and in doing so, highlight where there are gaps.
20.The Department said that another possible reason for the LEPs’ underspending is optimism bias in their initial project plans. LEPs can reprofile spending in agreement with their accountable bodies. The Department assured us that the funding was effectively ringfenced and that it could not used to fund shortfalls within the local authorities or combined authorities that hold the funds on behalf of LEPs. It says it has not considered clawing back any underspent funding from individual LEPs.
21.In 2018, the Department tied the future of LEPs to the development of local industrial strategies for their areas. It said that these strategies should set out a shared course for long-term development in local areas, and that they would be a prerequisite to LEPs accessing future funding after 2020–21. The Department has asked all LEPs to develop their local industrial strategies by early 2020.
22.Government has announced that the UK Shared Prosperity Fund will replace EU funding to local areas after the UK leaves the European Union. The Department has not yet finalised the design of the UK Shared Prosperity Fund. It has delayed a public consultation on the Fund’s future design and structure until it has more clarity about the terms on which the UK will leave the EU.
23.The Department stated it is “yet to be determined” how local industrial strategies will be used to determine the funding that local areas receive after the UK’s withdrawal from the EU. Previous European funding has largely focused on areas that are deprived, rather than those that were better off economically. However, the Department said it is “important” that the industrial strategies strike an effective balance between supporting deprived areas and areas that are already thriving. The Department stated that this will be a “challenge” and we remain unconvinced about how the Department will achieve this in practice.
24 C&AG’s Report, para 1.10
25 C&AG’s Report, para 2
26 HM Government, , July 2018
27 Qq 1–6
28 Qq 10–11
29 Q 7
30 C&AG’s Report, paras 1.14, 2.23
31 Q 17
32 Qq 17, 19
33 Q 20
34 Qq 19, 25, 28
35 Qq 25, 26, 27, 28
36 Q 29
37 C&AG’s Report, para 3.7
38 Q 105
39 C&AG’s Report, para 3.7
40 Q 101
41 Q 106
42 C&AG’s Report, para 3.14
43 Qq 78–79, 102–103
44 Q 106
45 Qq 109–110
46 Q 113
47 C&AG’s Report, paras 1, 1.7
48 - HCWS927
49 C&AG’s Report, paras 9, 3.10
50 Q 92
51 Qq 94–96
Published: 5 July 2019