The Ministry of Housing, Communities & Local Government has been rebuked by the National Audit Office for making “no effort” to evaluate the value for money of more than £9bn in local growth funding handed out since 2015.
The funding was delivered through local enterprise partnerships in three tranches of growth deals.
But the report is critical of the government for not properly assessing its impact. Although the ministry’s accounting officer is accountable for the Local Growth Fund - worth £12bn between 2015 and 2021 - the report says the ministry had made “no effort” to evaluate the value for money of the fund “nor does it have robust plans to do so”.
MHCLG has plans for an “informal evaluation” before the next spending review, but it concedes that this won’t lead to a clear understanding of the effectiveness of growth deals.
“The department needs a grip on how effectively these funds are used,” the report said. “It needs to act if it wants to have any hope of learning the lessons of what works locally for future interventions in local growth, including the new UK Shared Prosperity Fund.”
As reported by LGC earlier this year, some senior councillors are concerned that the shared prosperity fund – intended to replace EU funding post-Brexit - will be allocated to LEPs rather than councils.
MPs on the Commons housing, communities and local government Committee told Whitehall to publish the consultation on the design and administration of the UK Shared Prosperity Fund before the end of April, but the report indicates that this will be delayed further - “until [MHCLG] has more clarity about the terms on which the UK will leave the EU”.
MHCLG claims that tasking LEPs with developing local industrial strategies provides a “gateway to accessing future funding” after the UK leaves the EU.
The NAO’s report was commissioned to update the Commons public accounts committee on progress addressing their previous concerns about value for money and governance of LEPs.
It found that given the “significant amount of public funding” now being delivered through LEPs, and the “recent failure” of Greater Cambridgeshire and Greater Peterborough LEP, there is a “clear rationale for more demonstratable good governance” in LEPs and better oversight by MHCLG.
Last year the government withheld around £12m of funding from Greater Cambridge and Greater Peterborough LEP following allegations over the way it was being run.
The NAO report said on top of this one other LEP had had funding withheld and the release of payments to another two LEPs was being “staggered” until they made progress.
MHCLG told LGC that it will not provide details of which LEPs have had funding withheld because it says “naming and providing a commentary on individual LEPs who have had funding withheld would inhibit their effectiveness and their ability to invest to create jobs and growth in local communities”.
However, in March it was reported locally that the Greater Lincolnshire LEP was warned it might not receive its full £18m allocation to spend upfront in 2019-20, after it was deemed to have too much of its budget left this year.
Apart from withholding funding, ministers can also write to the LEP board to express loss of confidence in its leadership. But the report claims that these methods of intervention are weaker than those available in the case of failing councils.
MHCLG admits that it “cannot mitigate entirely the risk of a failure similar to Greater Cambridgeshire Greater Peterborough LEP”.
PAC chair Meg Hillier (Lab) said that MHCLG ”must ensure that such large sums of public funding are not being wasted”. She added: “The NAO’s latest report on LEPs does little to ease my Committee’s concerns; it is too early to tell if the Ministry’s remedial actions will get its governance up to scratch.
“Worryingly, the ministry also does not know if the funding is being used effectively to benefit local communities and businesses as intended.”
Responding to the report, chairman of the Local Government Association’s people & places Board, Mark Hawthorne (Con) said LEPs needed more support to deliver their objectives.
“With councils now working with LEPs to develop Local Industrial Strategies, and looking ahead to the UK Shared Prosperity Fund, councils are concerned that the government does not fully recognise the stretched capacity of individual LEPs and councils to carry out their work and meet new governance standards.”
There are some positives highlighted by NAO in the report, such as the “significant improvement” in LEPs’ financial transparency. In 2016, only 13% of LEPs shared financial information like salaries and only 33% published their annual report online, but now, all 38 LEPs publish financial information on the individual projects they fund and 85% publish annual reports online.
An MHCLG spokesperson said: “Local Enterprise Partnerships play a vital role in supporting the government’s ambition to rebalance the economy so it works for everyone.
“The NAO report recognises the positive work carried out by LEPs, supported by MHCLG, to ensure robust governance and financial transparency arrangements are in place.
“We continue to work with LEPs across England to further improve these standards and ensure value for money in local growth spending.”