Select committee inquiry
Local Enterprise Partnerships: progress review inquiry
Closed
What the inquiry looked at
“Local Enterprise Partnerships (LEPs) are private sector led partnerships between businesses and local public sector bodies. They were established in 2011 to drive economic growth in local areas. There are 38 LEPs in England, each operating across more than one local authority. The government has committed £12 billion to local areas in England between 2015-16 and 2020-21. Of this, £9.1 billion has already been allocated through Growth Deals negotiated between central government and individual LEPs. The Ministry of Housing, Communities & Local Government (MHCLG) is accountable overall for the Local Growth Fund and the delivery system within which LEPs invest the funding. The Committee reported on the Greater Cambridge Greater Peterborough Local Enterprise Partnership in May 2018. The National Audit Office (NAO) will report to the Public Accounts Committee on the work of the LEPs and MHCLG in early May. On 13 May the Committee will question the Permanent Secretary and other senior officials from MHCLG on the governance, transparency and value-for-money of LEPs and progress to meet the recommendations set out in previous NAO and Committee reports and Mary Ney's Review of Local Enterprise Partnership governance and transparency, which was commissioned to respond to NAO and PAC concerns.”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
In the committee's words, from the summary of 105th Report - Local Enterprise Partnerships: progress review ↗
The 38 Local Enterprise Partnerships (LEPs) in England have so far been allocated £9.1 billion through Growth Deals to drive economic growth in their local areas, with another £3 billion allocated via other means. We welcome the improvements to LEP governance and transparency since we last examined these issues, but there is still a long way to go for all LEPs to reach the rigorous standards we expect. We remain concerned that LEP boards are not yet representative of their local areas and business communities and that local scrutiny and accountability arrangements are not strong enough considering the significant sums of public funding that LEPs manage.
The Ministry of Housing, Communities and Local Government (the Department) is ultimately responsible for securing value for money for taxpayer funding which LEPs manage. But its decision not to evaluate the Local Growth Fund means it has no understanding of what impact spending through LEPs has on local economic growth.
LEPs have also continued to underspend their local growth funding allocations every year since 2015–16, calling into question their capacity to deliver the complex projects they said were critical to economic growth in their areas.
What the government said
No government response is linked to this report.
How the inquiry ran
Each dot is a dated item listed on this page, from the inquiry's opening on 13 May 2019 to 5 July 2019.
- Oral evidence 13 May 2019
- Report 5 Jul 2019
What it recommended 2 recommendations · 21 conclusions
1Despite spending up to £12 billion of taxpayers’ money, the Department has no real understanding...
Concluded (the committee's words)
Despite spending up to £12 billion of taxpayers’ money, the Department has no real understanding of the impact which the Local Growth Fund has had on local economic growth. The Department chose not to set quantifiable objectives for Growth Deals. Its assertion that every £1 of local growth funding could generate £4.81 in benefits is an unsubstantiated estimate. Despite receiving quarterly performance data from LEPs, the Department has not used this to build up an understanding of the impact that local growth funding has had nationally, nor has it measured what value for money LEPs have delivered so far. The Department was also not able to give us examples of the type of private sector match funding and investment generated through LEPs’ activities or their management of local growth funds. The Department has acknowledged that it must do better by including evaluation in the design of the UK Shared Prosperity Fund. It intends on using the ‘repository’ of information it holds around ‘what works well’ to inform this work. Recommendation: In the absence of national evaluation, the Department should use the performance data it receives from LEPs to build a national picture of what is working most effectively in boosting growth and use this to inform the design and plans for evaluation of the UK Shared Prosperity Fund.
2The Department has improved the assurance framework for LEPs but there is a long way...
Recommended (the committee's words)
The Department has improved the assurance framework for LEPs but there is a long way to go before all LEPs are held to account and their work scrutinised effectively. Given the significant amounts of public funding LEPs manage, there is a clear need for good governance and strong scrutiny. The Department has asked LEPs to adopt one of three models for arranging their local scrutiny arrangements, but it says LEPs are still ‘finding their way’. The Department had assumed that local scrutiny committees could take on the scrutiny of LEPs and their work ‘within their stride’ and has not considered the capacity of these committees to scrutinise LEPs properly, despite the understanding that this will involve a lot of resource and effort. Recommendation: The Department should set out how it is going to assess local capacity to scrutinise LEPs’ activities and how it will facilitate LEPs’ accountability to their local areas.
3There are entrenched difficulties with LEPs’ overlapping geographical boundaries which are supposed to be resolved...
Concluded (the committee's words)
There are entrenched difficulties with LEPs’ overlapping geographical boundaries which are supposed to be resolved by April 2020. In its 2018 policy paper Strengthening Local Enterprise Partnerships, the Department acknowledged that “retaining overlaps dilutes accountability and responsibility for setting strategies for places”. At that time, 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 says it is “working very actively” with these LEPs and relevant local authorities to meet its target of removing these overlaps by April
4LEP boards are not yet sufficiently representative of their local areas.
Concluded (the committee's words)
LEP boards are not yet sufficiently representative of their local areas. The Department recognises that reaching the gender diversity target of a third of LEP boards being female by April 2020 and gender parity by 2023 are both going to be difficult to achieve. The Department states that the government prioritised gender diversity as an obvious issue to rectify first. The Department does not require LEPs to be representative of local businesses in the area, despite acknowledging the need for LEP boards to reflect their local areas, nor does it plan to check how representative LEP boards are. Recommendation: Within the next 12 months, the Department should work with LEPs to agree a broader set of diversity targets for LEP boards. This should include targets that reflect the makeup of local businesses in their areas.
5LEPs continue to underspend their funding allocation each year, calling into question their capacity to...
Concluded (the committee's words)
LEPs continue to underspend their funding allocation each year, calling into question their capacity to deliver complex projects. LEPs underspent their Local Growth Fund allocations by a total of over £1.1 billion in the three years to the end of 2017–18. The Department’s forecasts show that the underspend is expected to be less in coming years, but it cannot be certain of this. The Department acknowledges that the low proportion of revenue funding given to LEPs to deliver major capital projects is problematic. It says capacity issues are unlikely to be the only reason why LEPs are underspending, but it is not clear how it has reached this conclusion given it has done no systematic analysis in this area. The Department has now commissioned a research project which will set out the capacity that LEPs have, and in doing so, highlight where there are gaps. Recommendation: The Department should write to us within three months to set out the results of its analysis of LEP capacity and how it will use this information to improve LEPs’ delivery of complex projects.
6There is a risk that funding allocated on the basis of local industrial strategies may...
Concluded (the committee's words)
There is a risk that funding allocated on the basis of local industrial strategies may not go to areas with the greatest need. The Department has tied the future of LEPs to the development of local industrial strategies for their areas, stating that this is a prerequisite to LEPs accessing future funding after 2020–21. However, the EU funding that is being replaced has largely been focused on areas that are particularly deprived, as opposed to areas which already have relatively high productivity and have the potential to build on existing growth. The Department acknowledges the importance of striking a balance between support to local economies that are further behind and support to areas that can build on existing high productivity. However, we remain to be convinced how the Department will achieve this in practice, and precisely how the local industrial strategies will be used to determine the funding that local areas receive is still to be determined. Recommendation: The Department should support LEPs to develop robust local industrial strategies based on the economic need of their areas and clearly set out how they will ensure a balance between supporting both high performing areas and areas which are lagging behind. Local Enterprise Partnerships: progress review 7 1 Oversight and assurance
7The Department is unable to give assurances that individual LEPs are making the best use...
Concluded (the committee's words)
The Department is unable to give assurances that individual LEPs are making the best use of significant amounts of public money and contributing as much as possible to the overall objective of local growth.9 The Department does not use aggregate information to report on the impact of Growth Deals, but it does use the information LEPs report to hold them to account in their annual performance reviews.10 LEPs submit data quarterly to the Department along with an indication of each project’s delivery risk. The Department accepts that there is more it could do to pull together the information they receive from all LEPs and not only restrict their view to the performance of individual LEPs.11
8The capacity funding received by LEPs requires match funding from the private sector.12 The NAO...
Concluded (the committee's words)
The capacity funding received by LEPs requires match funding from the private sector.12 The NAO reported in 2016 that contributions from the private sector had not materialised as the Department had intended.13 The Department was not able to give us examples of the type of private sector match funding and investment generated through LEPs’ activities or their management of local growth funds. Annual match funding returns submitted by LEPs to the Department only show the source of match funds. The Department could not explain what role LEPs have had in attracting additional private sector funding, or whether the private sector would have invested in these projects anyway through other funding arrangements.14 Scrutinising the work of LEPs
9The Mary Ney Review of LEP Governance and Transparency examined whether the system that the...
Concluded (the committee's words)
The Mary Ney Review of LEP Governance and Transparency examined whether the system that the Department had in place to assure itself of LEPs’ performance and governance was sufficient. It reported in October 2017 with 17 recommendations across eight areas including LEP culture and accountability; structure and decision- making; managing conflicts of interests; and transparency and government oversight.15 The Department wrote to the Committee in June 2018, confirming that the Department had addressed most of the Ney Review’s recommendations through publishing best practice guidance.16 The Department addressed the remaining recommendations through reissuing a National Local Growth Assurance Framework, which set out the new minimum standards for LEP governance and transparency.17
10In July 2018 the Department committed to supporting LEPs to set out how they will...
Concluded (the committee's words)
In July 2018 the Department committed to supporting LEPs to set out how they will ensure effective scrutiny and oversight of their investment decisions.18 It is up to each individual LEP as to which of three scrutiny models they adopt: an open offer to attend 8 Qq 80, 89–90 9 Qq 82–83 10 Qq 85- 86 11 Q 80 12 Q 32 13 C&AG’s Report, Local Enterprise Partnerships: an update on progress, Session 2015–16, HC 887, 18 March 2016, para 16 14 Qq 33–42 15 C&AG’s Report, para 4 16 Letter from Melanie Dawes, the Ministry of Housing, Communities & Local Government’s accounting officer, to the Committee of Public Accounts, June 2018 17 C&AG’s Report, para 4 18 HM Government, Strengthened Local Enterprise Partnerships, July 2018 Local Enterprise Partnerships: progress review 9 individual local authority scrutiny committees; setting something up with the local authorities covering their areas; or a joint committee with business representatives. “The Department reported that all LEPs have now set up the necessary scrutiny committees but said that LEPs are still “finding their way”.”19 Given this requirement is in its infancy, there is room for LEPs to become more robust in their approach.20
11In May 2019 the Department updated its guidance on scrutiny arrangements for local authorities which...
Concluded (the committee's words)
In May 2019 the Department updated its guidance on scrutiny arrangements for local authorities which includes references to LEPs. However, it said it did not know how many scrutiny committee members have received support or training on how to effectively carry out their function and that the responsibility falls to the accountable body of an individual LEP, typically an associated local authority or combined authority.21 The Department did not take into account the capacity of local scrutiny committees to do this work as it expected them to “take it in their stride” despite acknowledging the extra burden it creates.22 The Department accepts the need to keep challenging LEPs on their scrutiny arrangements.23 19 Q 73 20 Q 48 21 Qq 72 22 Qq 75 23 Q 48 10 Local Enterprise Partnerships: progress review 2 Strengthening LEP leadership and decision-making Geographical boundaries
12As LEPs were formed on a voluntary basis and asked to operate across functional economic...
Concluded (the committee's words)
As LEPs were formed on a voluntary basis and asked to operate across functional economic areas, many overlapped.24 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.25 The Department acknowledged that “retaining overlaps dilutes accountability and responsibility for setting strategies for places”.26
13The Department expects that remaining geographic overlaps will be resolved by April 2020 and says...
Concluded (the committee's words)
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.27 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.28
14The Department stated that capacity funding has already been withheld from those LEPs who have...
Concluded (the committee's words)
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.29 Representation of local communities
15The Department set an expectation that all LEP boards should have a maximum of 20...
Concluded (the committee's words)
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.30 LEPs are required to publish data on the representation of their boards which is discussed during individual LEP performance reviews with the Department.31 24 C&AG’s Report, para 1.10 25 C&AG’s Report, para 2 26 HM Government, Strengthened Local Enterprise Partnerships, 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 Local Enterprise Partnerships: progress review 11
16The Department told us that it prioritised gender diversity and set the target for gender...
Concluded (the committee's words)
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.32 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.33 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.34
17The Department considers it is important LEP boards are reflective of the economic areas they...
Concluded (the committee's words)
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.35 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.36 Capacity to deliver
18LEPs have underspent their Local Growth Fund allocations by over £1.1 billion in the three...
Concluded (the committee's words)
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).37 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.38 The Department forecasts that LEPs will underspend their total allocations through Growth Deals by £255.9 million by 2020–21.39
19The Department told us that LEPs have underspent their funding because it has taken them...
Concluded (the committee's words)
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.40 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.41 The Department has done no systematic analysis to understand LEPs’ capacity.42 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.43 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 12 Local Enterprise Partnerships: progress review
20The Department said that another possible reason for the LEPs’ underspending is optimism bias in...
Concluded (the committee's words)
The Department said that another possible reason for the LEPs’ underspending is optimism bias in their initial project plans.44 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.45 It says it has not considered clawing back any underspent funding from individual LEPs.46 Future funding
21In 2018, the Department tied the future of LEPs to the development of local industrial...
Recommended (the committee's words)
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 2020.47
22Government has announced that the UK Shared Prosperity Fund will replace EU funding to local...
Concluded (the committee's words)
Government has announced that the UK Shared Prosperity Fund will replace EU funding to local areas after the UK leaves the European Union.48 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.49
23The Department stated it is “yet to be determined” how local industrial strategies will be...
Concluded (the committee's words)
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.50 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.51 44 Q 106 45 Qq 109–110 46 Q 113 47 C&AG’s Report, paras 1, 1.7 48 Local Growth: Written statement - HCWS927 49 C&AG’s Report, paras 9, 3.10 50 Q 92 51 Qq 94–96 Local Enterprise Partnerships: progress review 13
Evidence
Oral evidence sessions 1
- 13 May 2019No witnesses recordedparliament.uk ↗