“Officials should be banned from taking cash from any public bodies they run following a Daily Mail investigation, Dame Margaret Hodge declared last night.
The former chairman of the Public Accounts Committee said the law must be changed to stop board members benefiting from grants.
Her intervention came amid fury over the Daily Mail’s revelations that officials responsible for billions of pounds have been handing money to their colleagues’ firms.
The Commons Business Committee last night said it was investigating the ‘extremely serious issues’ – after the Public Accounts Committee also launched a major probe.
Officials oversaw the payments after getting places on boards called Local Enterprise Partnerships – or LEPs – which consist of business bosses and council chiefs and were put in charge of £7.3billion meant to kick-start economic growth.
Reporters found LEPs have made at least 276 payments to their own board members, their companies, or projects from which they stand to benefit. One received £1million for his call centre, while another got £13,000 of payments towards events at his family castle.
‘There is a quite clear and simple answer to all this – you outlaw it,’ Dame Margaret said last night. ‘Where you’ve got a conflict of interest, you have to choose – you either are a member of the board or you want to make money out of it.’
Last night the Government insisted LEPs should investigate any suspect payments themselves – and that this was not the Government’s job.
But MPs said this was ‘simply not good enough.’ Dame Margaret criticised the Government for failing to properly scrutinise LEP spending.
‘It is your money and my money that they are spending,’ she added.
‘When Government sets up these fragmented structures it always fails to put in place proper regulatory systems. It’s because the Government doesn’t care. What the Mail has uncovered doesn’t surprise me, what it does is depress me.’
Incredibly, there are currently no rules to prevent LEP officials from using the money they have received to award grants for their firms’ benefit, or to make decisions in secret.
LEPs have failed to account for at least £3.7billion of the cash they have been given by the Government, in their responses to Freedom of Information requests by the Mail.
The revelations are a major embarrassment for Chancellor Philip Hammond, who handed LEPs another £1.8billion in last month’s Autumn Statement. Meg Hillier, Public Accounts Committee chairman, has vowed a major probe into the payments and the ‘utterly unacceptable’ lack of transparency. She said the boards were acting like ‘a cosy little club’.
Iain Wright, chairman of the Business, Energy and Industrial Strategy committee, said last night: ‘These are extremely serious allegations. LEPs have been given stewardship of massive amounts of public money. There appears to have been some appalling failings in accountability at some LEPs. We will want to know how they are spending public money and who is checking that they are spending it responsibly.’
Tory MP Philip Hollobone represents Kettering in Northamptonshire, the county where a banker on the LEP board received nearly £13,000 for his family’s Norman castle. He added: ‘The Daily Mail has played a crucial role in bringing these issues to national attention and is providing much needed scrutiny about how this money is being spent.
‘But it shouldn’t have been up to the Daily Mail. It is clear when LEPs were set up proper systems for scrutiny were not established. I would welcome further investigations from organisations like the PAC.’
The TaxPayers’ Alliance accused Government of ‘frittering away taxpayers’ hard-earned money’. Chief executive John O’Connell added: ‘Many of these cases quite frankly do not pass the smell test.’
Downing Street insisted it was ‘for those councils and partnerships’ to investigate ‘individual allegations’. But every council contacted by the Mail over suspect LEP payments has refused to investigate them.
Many councils and LEPs share the same staff, and when contacted by the Mail many councils offered joint statements with the LEP – apparently failing to understand they were supposed to be carrying out independent scrutiny.
The Prime Minister’s official spokesman said: ‘We expect these partnerships to maintain the highest possible standards.’
She said that after the Mail contacted the Government with its concerns it had taken action.
‘We strengthened the rules to make sure there was greater transparency,’ she added. ‘We have been very clear that we won’t hesitate to act if any LEP fails to comply with the new tougher standards.’
MORE CASE STUDIES
A former Mayor took £48,000 for his ‘beer factory’ – and another £14,000 for his brewing firm – from the LEP board he sat on.
The grants were handed to enterprises owned by George Ferguson while he sat on the board. He was Mayor of Bristol until earlier this year.
But no minutes exist on how the decisions were taken and no documents indicating his interest in the factory and brewing firm appear to have been published by the LEP.
The £48,000 grant for Mr Ferguson’s Bristol Beer Factory was supposed to be to support local jobs, but there is also no publicly available record of why his other beer firm – the Bristol Brewing Company – received two other payments totalling £14,499.
Neither the LEP nor Mr Ferguson would explain the payments.
While on the board, another company the Mayor was a director of – Destination Bristol – was also paid £10,000 in consultants’ fees by the West of England LEP.
Five other payments – worth just over £92,000 – were made to a company owned by one of Mr Ferguson’s political donors, Alasdair Sawday. The former Mayor said he had ‘properly declared all his known interests’ and ‘studiously avoided being involved in any decision relating to my own or family interests’.
West of England LEP said Mr Ferguson ‘played no part’ in the funding decisions but would not comment on why no registers of interest were available for former members or why minutes of key funding decisions before 2014 did not exist.
A zoo was given a £550,000 grant for ape enclosures after its chief executive joined the LEP board.
Sharon Redrobe said securing the funding had been her finest achievement. And after the grant was handed out, her pay went from £85,000 to £94,000, a rise linked to the zoo’s improved financial performance.
Dr Redrobe, 47, became CEO of Twycross Zoo in October 2013 and joined LEP board the following summer. Less than a year later, a panel on which two of her LEP colleagues sat approved a £558,000 grant to help the zoo refurbish animal enclosures.
Twycross Zoo denied Dr Redrobe’s pay rise was linked to the LEP grant. A spokesman said: ‘There is no conflict of interest. Dr Redrobe played no part in the grant decision.
Leicester and Leicestershire Enterprise Partnership also said Dr Redrobe had no role in the decision to grant the funds.
… fashion boss Susie Cave was handed a £53,000 taxpayer-funded grant from her Local Enterprise Partnership.
She was given the money after telling the LEP Coast to Capital she wanted to launch a designer collection but her business didn’t have enough cash.
By then, Mrs Cave’s designer clothes line – which she makes from the comfort of her home – had already been worn by celebrities such as Cate Blanchett and model Daisy Lowe.
But she told the board she needed more money to hire staff and launch a full collection for women ‘with money to spend on beautiful things’. It has now been launched, with dresses ranging from £575 to nearly £1,000.
Milliner to the stars Philip Treacy OBE and designer Bella Freud – Lucian Freud’s daughter – are among the company’s board members and advisers.
Mrs Cave, the business’s 50-year-old creative director, lives in a regency-era mansion worth around £3million with her husband Nick, the singer-songwriter, who is worth £4million.
Coast to Capital said: ‘This is a strong local business. It has already delivered the 5.5 jobs for local people it committed to at its premises on a Brighton Business Park. This grant, representing 25 per cent of the total investment, was awarded through a transparent process, with the proposal assessed against the published criteria by an independent panel.’ ”