Government still failing to get a grip on oversight of Local Enterprise Partnerships says PAC

In 2016 the Committee of Public Accounts reported on the governance of Local Enterprise Partnerships (LEPs) and made clear recommendations for improvement which were accepted by the Ministry of Housing, Communities and Local Government (the Department). 

 

Despite this, the Greater Cambridge Greater Peterborough Local Enterprise Partnership (GCGP LEP) provides the latest example of the Department devolving powers and funding to LEPs in a manner characterised by both complexity and confusion. 

 

The Department needs to get its act together and assure taxpayers that it is monitoring how LEPs spend taxpayers’ money and how it evaluates results.

 

The Department assures us that there was no misuse of public funds in this instance; however, this is due more to luck than effective oversight given that there appear to have been no effective mechanisms in place for identifying conflicts of interest in GCGP LEP. We are not at all convinced that the issues uncovered in GCGP LEP might not be found elsewhere in other LEPs.

 

We also put on record our displeasure at the conduct of the former Chair of GCGP LEP when giving evidence. He failed to appreciate the importance of good governance, showed a lack of remorse about the outcome for GCGP LEP, and was evasive when questioned about his potential conflict of interest.

 

Such an attitude only serves to underline the need for the Department to get a grip of its oversight of LEPs. It needs to implement quickly the recommendations of Mary Ney’s review of Local Enterprise Partnership governance and transparency, ensure that all LEPs and their boards are aware of the Nolan Principles for the standards of conduct expected in public life and ensure that they live up to these principles in practice.

 

COMMENT FROM PAC CHAIR MEG HILLIER MP

 

“Local Enterprise Partnerships are not an abstract concept on a Whitehall flipchart. They are making real decisions about real money that affect real people.

 

“This troubling case only serves to underline our persistent concerns about the governance of LEPs, their transparency and their accountability to the taxpayer.

 

“The Greater Cambridge Greater Peterborough Local Enterprise Partnership failed to comply with the standards expected in public life. Yet there are also clear failings in oversight by central government.

 

“Taxpayers need to be assured their money is being spent wisely and with adequate protections in place to prevent its misuse.

 

“Central government must move swiftly to ensure the recommendations of the Ney review are fully implemented and we expect to see evidence that this has happened.

 

“But it must also do a far better job of explaining the objectives and anticipated benefits of these local partnerships to local people.

 

“Taxpayers surveying the increasingly complex landscape of local government might reasonably ask what LEPs are for.

 

“It is wholly unacceptable that central government does not have a clear, up-to-date answer to that question.”

 

 

CONCLUSIONS AND RECOMMENDATIONS

Greater Cambridge Greater Peterborough Local Enterprise Partnership LEP (GCGP LEP) did not comply with expected standards in public life, particularly in terms of accountability and transparency. The governance arrangements at GCCP LEP were clearly not up to standard. GCGP LEP did not have a comprehensive conflicts of interest policy nor an up to date register of interests for board members. In addition, GCGP LEP was not acting transparently, as was illustrated by its failure to publish board papers and produce minutes in a timely or accessible manner. When appearing before this Committee, the former Chair refused to answer questions about his own potential conflict of interest, did not take responsibility for failings at GCGP LEP and seemed not to appreciate the importance of the Nolan principles for the holders of public office: principles which include accountability, openness, and leadership. GCGP LEP and its former Chair must accept responsibility for its failings. However, it is also the case, well illustrated by Mary Ney’s review, that roles, responsibilities, and accountabilities for all LEPs and their accountable bodies need to be much clearer. Without such clarity, we are extremely concerned that in other LEPs there could be a similar lack of openness to the public about the way they make decisions.

 

Recommendation: The Department should implement the Mary Ney review recommendations in full with all possible speed. It should reiterate the obligations of LEP board members under the Nolan principles; set out ways by which LEPs can enhance their openness and be clear on the training in corporate governance that Chairs and Chief Executives of LEPs should receive.

 

The Department’s oversight system failed to identify GCGP LEP as one which should have raised concerns. The Department has repeatedly given assurances to us that it has resolved issues in LEPs, but the case of GCGP LEP suggests that these assurances are without substance. There were failings at each stage of the Department’s system of assurance over GCGP LEP; notably, the Section 151 officer of Cambridgeshire County Council signed off on GCGP LEP’s assurance framework without checking all of its supporting documentation. Moreover, the Department did not flag GCGP as a LEP about which it had particular concerns, and its system of “annual conversations” with LEPs is not convincingly robust. It was only the correspondence from Mr Barclay which triggered the Department’s internal review, which then led to the withholding of funds from GCGP LEP. The Department informed us that it is now checking on LEPs’ compliance with their assurance frameworks. 

 

Recommendation: The Department should write to us setting out the results of its compliance checks and annual conversations and it should also publish these results.

 

Mary Ney’s review of LEP governance and transparency provides a sound basis for improvement; however, the Department has a long way to go before it can be sure that all LEPs have implemented the review properly.  Mary Ney’s review was comprehensive, making 17 recommendations to improve LEP governance and transparency, which the Department assures us that it is currently working to implement. However, as Mary Ney herself highlights, making people properly accountable is more about culture and actual implementation than it is just about guidance. Mary Ney also acknowledge that it was not possible during the course of the review for her to look in detail at all 38 LEPs in England. To check on the full compliance with the national framework and the implementation of Mary Ney’s review’s recommendations, the Department is conducting “deep dives” into around 12 LEPs across England per year.

 

Recommendation: The Department should write to us by 1 June 2018 with an update on the implementation of the Mary Ney review recommendations, and the results of its “deep dives.” It should set out how this will ensure that concerns unearthed in GCGP LEP are not present in other LEPs, and detail the guidance given to LEPs on corporate governance and transparency.

 

The government has not been clear about the current role, function, and purpose of LEPs in the context of the creation of directly elected mayors and combined authorities. As the case of GCGP LEP illustrates, LEPs are complex entities, often operating across numerous local government boundaries. Their value as a means of driving local economic growth is unclear, as is their fit with other organisations in the increasingly complex governance structure in England, such as elected mayors and combined authorities. The Department is presently undertaking a full policy review of LEPs, with a particular focus on their contribution to the government’s industrial strategy.

 

Recommendation: The Department’s policy review needs to make the role of LEPs absolutely clear, assess whether LEP boundaries are in the right place, evaluate their role in promoting economic growth and set out their place alongside new mayors and combined authorities.

 

The Department has not developed a full range of interventions for LEPs and only uses the extreme, blunt option of withholding funds. The Department has a wide range of interventions at its disposal for intervening in local authorities. However, LEPs are non-statutory organisations and are often private companies; this limits how the government can intervene in their operations. In the case of GCGP LEP, the Department moved straight away to the “nuclear” option of withholding funds, which meant the area missed out on over £37 million pounds of investment in 2017.

 

Recommendation: The Department needs to be alive to the ongoing risk of failure in LEPs and develop a proportionate range of interventions for LEPs, akin to those it has for local authorities.

 

The full text of the Committee’s Conclusions and Recommendations is included in the Report attached to this email.