East Devon Alliance evidence to National Audit Office on devolution

“Local Enterprise Partnerships accountability and value for money
Comments by East Devon Alliance submitted 18 March 2016

1. Lack of regional logic to LEP grouping

1.1. The key problems limiting growth in the South West are inadequate communications: road; rail; air; broadband and mobile telecoms, through the narrow peninsular. These are limited by a topography that becomes progressively more challenging the further west you go. Yet, instead of treating the peninsular as a single entity, it is split. Cornwall, which is already a unitary authority, has gone it alone and already been given limited devolved powers covering: bus services and local investment; and integrated health and social services. Devon and Somerset LEP have just submitted a bid which is much more ambitious.

1.2. What is the value and regional logic underpinning these LEP groupings?

2. Constitutional Issues and lack of engagement

2.1. “Heart of the South West” (HOTSW) (Devon and Somerset including Plymouth and Torbay unitary authorities) LEP lodged a bespoke articles of association (constitution) and became incorporated at Companies House on 6 Feb 2014; adding clauses, for example, that removed the asset lock, fundamental to Community Interest Companies (CIC), in certain circumstances.

2.2. It is a private CIC company run by a board of 21 Directors who are self-selecting. Six of these are elected councillors from six of the 17 local and unitary authorities across the two counties. There are only four women and no ethnic minorities on the board. No minutes of meeting have been available in the public domain until the last few days. First information began to filter out in Sept 2015 with publication of a statement of intent. Even politically savvy individuals are essentially still in the dark. Little publicity has been given to the submitted bid so far.

2.3. County Councillors, not part of the controlling group, claim that the first they knew of what was going on was around October 2015 when final proposals were debated. They certainly knew nothing at the time the LEP held its first meeting in July 2012. One Independent Councillor tabled an amendment at the October 2015 meeting to allow for public consultation. This seems to have been accepted but no consultation had taken place before the bid was lodged with Central Government. Local district councillors were similarly kept in the dark. In East Devon District Council it seems that the leader, who is a LEP Director, was given fully delegated authority to negotiate. He may have reported to cabinet but not to members. Local authority whipping, with highly constrained debate in some councils, ensured that all councils signed up to the deal. There has been no engagement with the public. The residents of the two counties are not even considered stakeholders in the company.

2.4. How accountable and transparent has this exercise been? What negative effect has it had on democracy?

3. Governance and transparency

3.1. In a 2011 survey, 47% of people felt that UK local government was affected by corruption. We, in East Devon, are particularly sensitised to this possibility following a Daily Telegraph sting operation in 2013 when a local councillor, one time Chair of the local business forum, claimed he could help to secure planning permission, but that he didn’t come cheap. He eventually resigned.

3.2. It seems inescapable that Directors of LEPs will, and should, have close connections to the businesses in their region; and the HOTSW constitution contains the usual requirements to declare interests and conflicts of interest. There appears, however, to be no scrutiny or public audit mechanism to oversee this, and according to the 17 November minutes “Feedback from business indicates that they are not very concerned about governance”.

3.3. To date we have found no details of contracts or service level agreements made. We have been unable to discover how much is being spent on salaries, pensions, admin, etc. Yet HOTSW has been given £65.2M in the second round of the growth deal. HOTSW has a PO Box number but no address

3.4. Is an adequate system of checks and balances in place to scrutinise, account for and control LEP expenditure?

4. Representation

4.1. The business enterprises, other than utilities and health, represented on the Board are Defence (2), Universities (2), Developers (2 or 3 depending how you classify a planning lawyer).

4.2. How effectively can this LEP represent and promote the interests of the small businesses typically found in a rural area (tourism, agriculture, distribution, small builders etc)?

5. Is the proposal soundly based and good value for money?

5.1. The bid to Central Government made by “Heart of the South West” is to build 179,000 more new homes in the next 15 years; boost productivity and create 163,000 new jobs, adding around £20 billions to the local economy through better jobs and higher skills; improve roads and railways, reducing travel time; and reshape the health and care system to meet social, economic and financial pressures. This represents a planned annual growth of 3%+ which by their own admission even Bristol, Birmingham and Nottingham collectively have not achieved in the last 15 years. These three cities have a similar population to the rural one of Devon and Somerset. Regrettably, in Devon and Somerset, we start from an un-competitively low base with productivity only 80% of national levels. Hinkley Point C, located in the north east corner of Somerset and well connected to the Midlands, is claimed to be one of the Golden Opportunities to make this transformation. The gain in jobs across the whole UK from this project is estimated at 25,000, well short of the 163,000 quoted above. Hinkley Point C is years behind schedule and slipping.

5.2. Overall the proposal is lightweight, lacking detailed evidence, risk analyses, targets, critical success factors etc.

5.3. Many of the 17 Local Authorities in the two counties have just gone through a painstaking analysis of housing and economic growth assessment. They have conducted formal Strategic Housing Market Assessments which have been scrutinised in public by a Planning Inspector. These appear to have been replaced by assumptions lacking a realistic economic assessment.

5.4. What is the value for money of this duplication of effort concerning growth assumptions? Is the bid of 3%+ annual growth over 15 years based on realistic and sound economic assumptions, given that all the other LEPs across the country are making similar assessments and projections for long term UK growth are much lower? How is success to be monitored?

5.5. As a matter of curiosity we have examined another bid from D2N2 Local Enterprise Partnership (promoting economic growth in Derby, Derbyshire, Nottingham and Nottinghamshire). There appear to be some marked similarities to the HOTSW bid.

5.6. To what extent is effort being duplicated across the country by LEPs all essentially doing the same thing? Is this good use of scarce public funds?”