The Ministry of Housing, Communities and Local Government has been urged by MPs to “get its act together” to improve the monitoring of local enterprise partnerships.
In a review of the oversight of LEPs, which were established following the abolition of Regional Development Agencies in 2010 and are responsible for developing strategic economic plans for their areas, MPs concluded that the government needs to make their role "absolutely clear" given their expanding remit and role in delivering the government's industrial strategy.
The report follows concerns raised about the governance of one of the LEPs, covering Greater Cambridge and Greater Peterborough (GCGP), which a Public Accounts Committee report published today concluded did not comply with the Nolan principles on standards in public life, particularly in terms of accountability and transparency.
The examination by MPs on the committee, which followed a governance review by the National Audit Office after concerns were raised by Conservative MP Steve Barclay, concluded that arrangements “were clearly not up to standard”.
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Concerns included that the chair of GCGP LEP might have benefited from investment of public funds in the LEP's area of operation.
The PAC report highlighted that the LEP "did not have a comprehensive conflicts of interest policy nor an up to date register of interests for board members" and it was not acting transparently due to a failure to publish board papers and produce minutes in a timely or accessible manner.
“When appearing before this committee, the former chair [Mark Reeve] 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.”
Although the report stated that “GCGP LEP and its former chair must accept responsibility for its failings”, MPs also said that MHCLG must make the responsibilities and accountability for all LEPs 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,” the report stated.
In particular, it called for an improved oversight system, stating that the department's “insufficiently robust” processes had “failed to identify GCGP LEP as one which should have raised concerns”.
Concerns over assurances on LEP governance
It was only after concerns were raised by Barclay that the department’s internal reviews were triggered, although it is now checking all LEPs’ compliance with their assurance frameworks. A governance review by Mary Ney, a departmental non-executive director, was also subsequently undertaken.
The department did not find evidence of misuse of public funds, but it did find that GCGP LEP’s assurance framework did not comply with national standards and that the LEP was unable to respond effectively to these concerns. This led to money being withheld from the LEP in March 2017, and then its liquidation in December.
“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,” the MPs concluded.
MHCLG must publish the results of its checks, the committee said, as part of its response to the report.
Committee chair Meg Hillier said that LEPs “are not an abstract concept on a Whitehall flipchart”.
“They are making real decisions about real money that affect real people,” she said.
“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.”
The report also noted that LEPs are seen as key to the implementation of the government’s industrial strategy, and MHCLG is currently undertaking a full policy review of LEPs, with a focus on their contribution to the implementation of the industrial strategy. Alexandra Jones, the director of industrial strategy at the Department for Business, Energy and Industrial Strategy, told Civil Service World its implementation will require close working with local government, including LEPs and recently-created mayoral combined authorities, which have been tasked with developing local plans to focus on their strengths within the strategy.
Responding to the PAC report, a spokesman for MHCLG said: “Local Enterprise Partnerships help drive economic growth and we have put clear rules in place to ensure they are transparent, avoid conflicts of interest and use taxpayers’ money effectively.
“We have committed to fully implement the findings of an independent expert into the way they are governed.
“We will take swift action if any LEPs are found not to have followed our rules.”