Doubts cast on LEPs as £1.1bn underspend is revealed

A review of how Local Enterprise Partnerships (LEPs) in England have spent billions of pounds of Growth Deal money has cast doubt on how effective the spending was and concluded that LEPs across the country underspent by £1.1bn in three years.

A Parliament select committee has this morning published its progress review of LEPs. Its findings shows that the Ministry of Housing, Communities and Local Government –  the Government department responsible for the funding which LEPs manage – did not know how effective the £12bn of funding had been for local economic growth.

It also said that a considerable underspend was a sign that capital projects were not coming through quickly enough. In total, LEPs underspent their Local Growth Fund allocations by a total of over £1.1 bn in the three years to the end of 2017-18.

The report said that “rapid lessons need to be learnt to help shape funding economic growth post the EU.”

The 38 Local Enterprise Partnerships (LEPs) in England have so far been allocated £9.1bn through Growth Deals to drive economic growth in their local areas, with another £3bn allocated via other means. The committee said the ministry’s decision not to evaluate the Local Growth Fund meant it had no understanding of what impact spending through LEPs had on local economic growth.

The select committee added: “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.”

It added that the LEPs had 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.

Chair of the select committee, Meg Hillier MP, said: “Local Enterprise Partnerships have been given £12 billion of taxpayers’ money to support local economic growth.

“But LEPs have underspent their funding allocation by over a £1 billion in the past three years, raising questions about their capacity to deliver complex projects.

“The Committee has previously raised concerns about the transparency and governance of LEPs and more action is needed to ensure they are held properly accountable for spending.

“LEPs are supposed to be an engine room of local economic growth but they have been dogged by a lack of local accountability and there is little evidence that they have levered in the promised private sector funds.”

A spokesman for Leeds City Region LEP, which has the largest growth deal nationally, said: “We agree that a lack of revenue funding within growth deals has made delivery of complex schemes challenging, particularly in the early days of this large-scale investment programme. However from a standing start we have put in place the structures, governance and capacity to invest a total of £418 million so far in over 200 projects across the City Region.”

The spokesman added that investment “was making a real difference to our City Region economy and its people.”

They said: “To date our Growth Deal has created or safeguarded over 27,500 jobs; is helping people get around the region more easily thanks to the 17 major transport schemes we’ve supported so far; enabling young people and apprentices to develop their skills in world-class college facilities thanks to an overall £79 million Growth Deal investment; and has supported 10,000 businesses in the region to grow and create opportunities for local people.

“We take our responsibility for this investment very seriously which is why we have made a commitment to be the most transparent LEP in the country. In line with this commitment, government guidelines and the influential Ney Review of LEPs, we are pleased to note that we are already delivering against the key conclusions of this report.

“We believe that having the Combined Authority as our accountable body is an excellent model for achieving the right balance of meaningful private sector involvement and leadership in economic and transport development, alongside proper accountability and scrutiny.”

The report recommended that in the absence of national evaluation, the Government department should use the performance data it receives from LEPs to build a national picture of what is working most effectively in boosting growth.

It also added that 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.

The select committee also found that there are entrenched difficulties with LEPs’ overlapping geographical boundaries which are supposed to be resolved by April 2020. It said a clear timetable needed to be set out showing how it will meet the April 2020 deadline and what action it will take if local authorities fail to agree on overlapping boundaries.

The select committee ordered the department to share within three months the results of its analysis of LEP capacity and how it will use this information to improve LEPs’ delivery of complex projects.