Governance and transparency – How does our Local Enterprise Partnership measure up?

A long read, but if you worry about the unaccountability of our Local Enterprise Partnership (and you should) it is a “must read” – note the requirement for LEPs to be scrutinised by council scrutiny committees:

For good or ill the Government has chosen Local Enterprise Partnerships (LEPs) to play a key part in assisting in the delivery of government policies to support local economic growth.

There are 38 LEPs in England. Through the Local Growth Fund, the government has committed £12 billion to local areas between 2015 and 2021; £9.1 billion of this is through Growth Deals with LEPs. The government also sees LEPs as key to its new industrial strategy. But performance has varied as acknowledged in the government’s publication of July 2018 “Strengthened Local Enterprise Partnerships”.

Amongst other things this paper announced that all the recommendations of last year’s Mary Ney review (see below), and this year’s Public Accounts Committee (PAC) report on Governance and Departmental oversight of the Greater Cambridge Greater Peterborough (GCGP) LEP, would be accepted.

Now is the moment to review these three publications which, taken together, amount to a scathing criticism of the way LEP governance arrangements, and government oversight of them, have, to date, been working.

PUBLIC ACCOUNTS COMMITTEE

https://publications.parliament.uk/pa/cm201719/cmselect/cmpubacc/896/896.pd

In 2016 the PAC reported on the governance of LEPs and made clear recommendations for improvement which were accepted by the Ministry of Housing, Communities and Local Government. [Footnote: East Devon Alliance submitted evidence to this inquiry].

Despite this, things are going seriously wrong and, in the words of the PAC: “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.

In the case of CGGP (Greater Cambridge Greater Peterborough Enterprise Partnership) the LEP could not respond satisfactorily to allegations of conflicts of interest, levelled by an MP. The governance arrangements were not up to standard. There were no comprehensive conflicts of interest policies nor an up to date register of interests for board members. In addition, the LEP was not acting transparently.

In March 2017, the Department applied the nuclear option and withheld the release of money to the LEP. Then, in December 2017, the LEP went into voluntary liquidation, following the Chair’s resignation the previous month.

Key findings by the PAC were that GCGP LEP did not comply with expected standards in public life, particularly in terms of accountability and transparency. Also that the Department’s oversight system failed to identify that GCGP LEP as one which should have raised concerns. Furthermore, that the Department has a long way to go before it can be sure that all LEPs have implemented Mary Ney’s review properly.

MARY NEY REVIEW

https://www.gov.uk/government/publications/review-of-local-enterprise-partnership-governance-and-transparency

Which leads us to: the “Review of Local Enterprise Partnership Governance and Transparency”, Led by Mary Ney, Non-Executive Director, DCLG Board, October 2017. This is an internal departmental review but nevertheless surprisingly thorough.

The review makes 17 recommendations (all now formally accepted) covering the following topics: Culture & Accountability; Structure & Decision-Making; Conflicts of Interest; Complaints; Section 151 [financial accounting] Officer Oversight; Transparency; Government Oversight & Enforcement. Just a few of these 17 recommendations of particular importance are highlighted out below.

Many LEPs have codes of conduct reflecting the requirements of company board directors and do not sufficiently embrace the dimension of public sector accountability. This is inadequate as it does not reflect the dual dimension (i.e. public and private) of the role of board members.

The code of conduct, which all board members and staff sign up to, should explicitly require the Nolan Principles of public life to be adopted as the basis for this code. E.g. the notion of integrity whereby holders of public office must avoid placing themselves under any obligation to people or organisations that might try inappropriately to influence them in their work. They should not act or take decisions in order to gain financial or other material benefits for themselves, their family, or their friends. They must declare and resolve any interests and relationships.

Key features of decision-making to ensure good governance and probity should include:

• a clear strategic vision and priorities set by the Board which has been subject to wide consultation against which all decisions must be judged;
• open advertising of funding opportunities;
• a sub-committee or panel with the task of assessing bids/decisions
• independent due diligence and assessment of the business case and value for money;
• specific arrangements for decisions to be signed off by a panel comprising board members from the local authority, in some cases including a power of veto;
• Section 151 officer line of sight on all decisions and ability to provide financial advice;
• use of scrutiny arrangements to monitor decision-making and the achievements of the LEP.

Conflict of Interest declarations must include employment, directorships, significant shareholdings, land and property, related party transactions, membership of organisations, gifts and hospitality, sponsorships. Interests of household members to also be considered.

LEPs to include in their local statements how scenarios of potential conflicts of interest of local councillors, private sector and other board members will be managed whilst ensuring input from their areas of expertise in developing strategies and decision-making, without impacting on good governance.

LEPs will need to publish a whistleblowing policy.

As part of transparency, in addition to the obvious things such as agendas and minutes, LEPs should maintain on their websites a published rolling schedule of the projects funded giving a brief description, names of key recipients of funds/ contractors and amounts by year.

GOVERNMENT RESPONSE – STRENGHTENED LEPs

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/728058/Strengthened_Local_Enterprise_Partnerships.pdf

In accepting these recommendations the government in its “strengthened LEP” paper does add a few points of clarification which are worth noting.

Readers may recall our LEP, Heart of the South West (HotSW), proposing in its 2015 prospectus “towards a devolution deal” to deliver, amongst other things, a world-class integrated health and care system within our communities. A prospectus produced without any public consultation. Well, the government has taken on board a further PAC criticism that it has not been clear about the current role, function, and purpose of LEPs.

The government now says it will set all Local Enterprise Partnerships a single mission to deliver Local Industrial Strategies to promote productivity.

Each Local Enterprise Partnership’s overall performance will be held to account through measures agreed in their delivery plans. The Government will work with Local Enterprise Partnerships to ensure that they have these plans in place by April 2019.

In addition, Government will commission an annual economic outlook to measure and publish economic performance across all Local Enterprise Partnerships and benchmark performance of individual Local Enterprise Partnerships. In the light of HotSW aim of a 4% annual growth rate and record-breaking productivity growth, starting this year, this might prove to be an interesting exercise.

Other points on topics such as increasing diversity of board members are covered in the previous Watch blog:

https://eastdevonwatch.org/2018/07/27/government-proposes-shake-up-of-local-enterprise-partnerships/

MEANWHILE

The House of Commons Communities and Local Government Committee inquiry into Effectiveness of local authority overview and scrutiny committees was also investigating LEPs and made this recommendation in December 2017 [East Devon Alliance submitted evidence to this inquiry as well]:

“The Government to make clear how LEPs are to have democratic, and publicly visible, oversight. We recommend that upper tier councils, and combined authorities where appropriate, should be able to monitor the performance and effectiveness of LEPs through their scrutiny committees. In line with other public bodies, scrutiny committees should be able to require LEPs to provide information and attend committee meetings as required.”

https://publications.parliament.uk/pa/cm201719/cmselect/cmcomloc/369/369.pdf

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