Local growth schemes such as LEPs "yet to show value for money"

The National Audit Office has fired a warning that the Government’s flagship initiatives for supporting local economic growth – such as Local Enterprise Partnerships (LEPs) – are yet to be shown as delivering value for money.

For its report, Funding and structures for local economic growth, the spending watchdog reviewed LEPs, Enterprise Zones and City Deals as well as funding mechanisms such as the Regional Growth Fund and the Growing Places Fund.

These schemes were put in place by the Government when it axed regional development agencies.

The NAO report found that:

  • LEPs were making progress at different rates. “Some partnerships continue to face significant capacity issues, a factor exacerbated by the recent step change in the demands placed upon them through introducing the Growth Deals and new responsibilities for EU structural funds.” The Government has announced additional funds to build capacity;
  • The Growing Places Fund had been “limited to date in spending money and creating jobs”;
  • Enterprise Zones and the Regional Growth Fund had also been slow to create jobs. They faced “a significant challenge to produce the number of jobs expected”. The NAO pointed out that the estimate of jobs to be created by Enterprise Zones by 2015 had dropped from 54,000 to between 6,000 and 18,000;
  • There was no plan to measure outcomes or evaluate performance comparably across the range of different local growth programmes.  “Departments cannot therefore show value for money across the programme of local growth initiatives or be sure about where to direct their resources to achieve the most impact”;
  • The eight City Deals were at an early stage but were progressing well in establishing the right structures and processes;
  • The DCLG was using its system of accountability for local authority spending for the new structures for local growth. “However, the involvement of Local Enterprise Partnerships in decision-making presents risks which need to be managed”;
  • Locally, it was not clear that the Government had achieved its objective to “increase democratic accountability and transparency, and ensure that public expenditure is more responsive to the needs of local business people”. The allocation of the Regional Growth Fund, the most substantial component of local growth funding, was decided centrally following a competitive process. “While this may be responsive to local businesses it has no direct connection to the local democratic process. Increasing democratic accountability and transparency was never an objective for the Regional Growth Fund.” Links between LEPs, and therefore the Enterprise Zones, Growing Places Fund and the Growth Deals, and the local democratic process were “complex and weak in certain instances “. In addition, LEPs were not subject to the same transparency requirements as local authorities.

The spending watchdog said that the Government closed regional development agencies effectively, but failed to establish the new local programmes in time. The Regional Growth Fund had a slow start and the Government did not allocate funding as quickly as originally planned.

This led to “a significant dip” in local growth funds and jobs created. According to the NAO, direct central government spending on local economic growth through the initiatives fell from £1,461m in 2010-11 to £273m in 2012-13. However, it will rise to £1,714m in 2014-15.

The NAO said central government needed to plan such reorganisations more effectively, “to ensure that sufficient capacity is in place both centrally and locally to oversee initiatives and that accountability is clear”.

It also called on DBIS and the DCLG to address how they intended to evaluate performance and monitor outcomes.

Amyas Morse, Head of the NAO, said: “Three years on from the 2010 White Paper, the new local Enterprise Partnerships are taking shape and jobs are being created. But the transition from the old to the new schemes has not been orderly and there has been a significant dip in growth spending.

“To secure value for money from both the existing schemes and the new £2 billion Growth Deals, central government needs to make sure that there is enough capacity centrally and locally to oversee initiatives, that timescales are realistic and that there is clear accountability.”

A copy of the NAO report can be found here.