Big questions remain unanswered in Government’s LEP review

The review does not fully address issues around LEP public accountability and spending in non-mayoral areas

Amongst a rash of Government documents published before the start of Parliamentary recess last week, the Ministry of Housing, Communities and Local Government (MHCLG) published new proposals to strengthen Local Enterprise Partnerships (LEPs) last week.

The review had been promised in the Industrial Strategy White Paper last year and responds to many of the recommendations in the National Audit Office’s 2016 review of LEPs. Yet while it is precise and demanding in addressing issues of internal organisation and accountability in LEPs, the review is less clear on bigger questions about these bodies – in particular their suitability and responsibility for setting public spending.

Clarity in some areas

The review reverses the initial freedom for LEPs to set themselves up however they saw fit, setting a number of clear demands for how LEPs are organised – from the maximum size of boards to term limits for chairs. If any LEPs fail to shape up to these new conditions quickly, Government will cut their funding.

The reforms to accountability, structure, evaluation and performance management set out in the review will enable comparisons to be made between LEPs, which will allow central government to better hold them to account. The review also brings £20m of new funding for LEPs, in a bid to increases their independence from local government. These reforms signal more clearly that LEPs are agents of the Government. This is a long way from the independent, self-funded and self-organised bodies envisaged in 2010.

But while the MHCLG review offers clarity on this, three issues, in particular, remain unclear:

  1. Are metro mayors supported by LEPs the preferred model for major cities?

The review states that in Mayoral Combined Authorities (MCAs), LEPs will act as an independent business-led scrutiny body of the MCAs’ economic policy – an important distinction against LEPs in non-mayoral areas. This is welcome recognition of the greater accountability and capacity of metro mayors to devise and implement economic policy in their city region.

But while the review is forthright on the need for reforms to LEP geographies to match MCAs, it has little to say on how to make it happen. The Government should also be clearer on whether this is the preferred set-up for all large cities, and if so set out how it will make it happen.

And beyond asking LEPs to actively engage with local authority scrutiny panels, nothing is said about how voters in non-MCA LEP areas – urban or rural – might hold LEP decisions locally accountable.

  1. Are LEPs the right bodies to set spending priorities for public funds?

The review does not address this question, despite numerous concerns about the appropriateness of LEPs having oversight of public spending.

Firstly, public policy expertise and business nous don’t always go together. While the same charge can be levelled at council leaders, it is not clear that a business leader will have greater knowledge about local economic policy and implementation.

The potential for institutional capture, conflicts of interest and policies focused on large, existing employment sectors as opposed to future needs and growing industries add to the downside risks of outsourcing local policy to business.

It is also democratically problematic. LEPs in MCAs are already largely subsumed into local government structures, a role confirmed in the review by putting metro mayors in charge and spinning LEPs out more clearly to scrutinise this. But elsewhere, should local businesses be making this decision rather than elected officials accountable to the public affected by these decisions?

Some LEPs already feel uneasy spending large amounts of money with no public mandate. Only 49 per cent agreed that there are clear lines of accountability from the LEP to the local electorate.

Finally, there are other voices of businesses out there. Even after all of these reforms and extra funding, LEPs may still lack the broad membership and engagement with local businesses that bodies such as Chambers of Commerce can offer.

  1. What are the incentives for LEPs to improve their performance?

More than greater flexibility with the same level of funding, Government should provide a sharper incentive to LEPs. Those with better evaluation and performance management should receive more funding. Poorly performing LEPs should lose funding – money spent badly should be stopped, not more tightly overseen. And if a LEP is consistently weak, it should be possible to direct funding to an alternative capable local representative body if they exist in the area.

The Government is currently working on its upcoming Devolution Framework, which is due in the autumn. It should use the Framework as a chance to address some of these issues which remain unclear. In particular, it should consider:

  • Setting up a mechanism by which  LEPs and metro mayor areas will be aligned
  • Offering clarity about which city regions are still expected to have a metro mayor
  • Offering guidance to non-mayoral  cities about how their residents can hold LEPs to account

Watch this space for more commentary on the Devolution Framework over the coming months.

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