Conflicts of interest of LEP representatives on the WMCA Scrutiny Committee?

How is the West Midlands Combined Authority supposed to be held to public account? In the absence of an elected Assembly, as in London, the whole responsibility lies with its Overview and Scrutiny Committee.  As it is at present constituted the Scrutiny Committee is seriously incapable of carrying out that responsibility.  The Scrutiny Committee has only has 12 councillor members. It is scheduled to have only four meetings during the year, for two hours each.  It is inconceivable that the Committee can engage with the huge range of activities of the WMCA, select issues to scrutinise and carry out a serious process of scrutiny in that time. (Each set of documentation for the monthly CA Board meetings typically amounts to a couple of hundred pages, let alone those from the other dozen or more committees.) The CA can set up sub-committees of Scrutiny but there is no sign of it doing so. The Scrutiny Committee can set up Review Panels but only with the authority of the CA AGM, which leaves no room for flexibility, and so far none are planned.

But there is another major concern about the Scrutiny Committee – its independence. It allocates 3 places to representatives of the 3 Local Enterprise Partnerships, the employer-led bodies representing business interests. This is an extraordinary decision which seems unique among Combined Authorities. (For example, there are no LEP representatives on the Greater Manchester CA Scrutiny Committee.) It raises fundamental questions about potential conflicts of interest.

LEPs are not … disclosing conflicts of interest to the public”

The first problem is that the LEPs do not themselves disclose conflicts of interest to the public. That is the judgement of Cities and local growth, the House of Commons Public Accounts Committee report into devolution and Combined Authorities, published in June 2016:

“It is alarming that LEPs are not meeting basic standards of governance and transparency, such as disclosing conflicts of interest to the public. LEPs are led by the private sector, and stakeholders have raised concerns that they are dominated by vested interests that do not properly represent their business communities. There is a disconnect between decisions being made by local business leaders and accountability working via local authorities. It is therefore crucial that LEPs demonstrate a high standard of governance and transparency over decision making, at least equal to the minimum standards set out by government in the assurance framework. It is of great concern that many LEPs appear not be meeting these minimum standards.” (p8. Emphasis in original)

In December 2016 the Public Accounts Committee issued a follow-up report, Devolution in England: governance, financial accountability and following the taxpayer pound.  It concludes:

“Local Enterprise Partnerships (LEPs) are designed to bring together the public and private sector, and identify economic priorities in their local areas. […] LEPs have signed up to local authority accountability frameworks: but their functions and structures are very different to local authorities and accountability for their activities is opaque.“ (para 24. My emphasis.)

So the 3 LEP members on the Scrutiny Committee are there representing LEPs which themselves may not meet the “basic standards of governance and transparency” that Scrutiny itself requires. Can they be relied on to publicly criticise their LEPs when there is a potential conflict of interest?

The Black Country rep is from Ernst and Young, global neoliberal accountants

So far two of the three LEP places have been taken up by named representatives. One is Sarah Windrum, founder and CEO of Warwickshire technology company The Emerald Group, on behalf of the Coventry and Warwickshire LEP. The other is Black Country LEP Board Member Paul Brown, Director of Government Services for Ernst & Young, a global accountancy company.

The issue of potential conflicts of interest is particularly relevant in the case of Paul Brown. Ernst & Young is one of the world’s big four accountancy firms with annual global revenues of $28.7bn in 2015, $2bn of it from the UK.  The presence of a senior executive of Ernst and Young on the WMCA Scrutiny committee raises a fundamental question of potential conflicts of interest.

In the UK, as Ernst and Young’s website says, it is closely involved in the formulation and delivery of policy “across a wide range of central Government departments”.  Given the controlling role of government in the WMCA it is inevitable that Paul Brown, as Director of Government Services, would be exercising scrutiny on behalf of the CA over policies which his employer, Ernst and Young, would have been involved in formulating and delivering. It could also be the case that Ernst and Young is, or could be in future, carrying out work for the Councils which make up the WMCA, and even for the WMCA itself.

Will Scrutiny challenge the economic agenda of the WMCA?

There is another sense in which there is a conflict of interest. Ernst and Young is one of the accountancy and consultancy companies at the heart of the neoliberal economy.  It is committed to neoliberal economic policies which create huge inequalities of wealth in society. According to the Independent (27 January 2016),

“When it comes to the most controversial tax-avoiding US technology companies, one common thread appears: the accountancy giant Ernst & Young (EY). The firm serves as auditor and tax adviser to Google, Apple, Facebook and Amazon – the businesses which have come under the most fire for avoiding taxes. EY’s presence at each multinational makes it by far the most prevalent accountant in the current tax controversy.”

Senior staff at EY directly benefit from EY’s lucrative role in the neoliberal economy. The typical salary of an executive director at EY (according to the Glassdoor website) is £169,000 a year.  I don’t know if Paul Brown is a Partner in EY, but in 2015 the 696 UK Partners each received a profits payout of £700,000. According to the Resolution Foundation report Midlands engine trouble: The challenges facing the West Midlands Combined Authority, published in December 2016, the average household income in the WMCA area is the lowest in the UK. The median gross hourly pay –i.e. not the average – of residents in Wolverhampton in 2016 was £10.23. At that rate, assuming a 40 hour week, it would take a Wolverhampton household around 34 years to earn £700,000. It’s two different worlds.

But these huge inequalities of income and wealth in the West Midlands are not mentioned at all in the WMCA’s Strategic Economic Plan, which is based on the LEPs’ own plans. Surely one of the priorities of the Scrutiny Committee is to challenge this and map out a different policy direction in the interests of the vast majority of citizens of the West Midlands to whom it should be accountable? The question that then arises is whether that would create a conflict of interest for the Black Country representative on the Scrutiny Committee.

The Black Country LEP and Housing and Land Use – potential conflicts of interest?

There is another area of potential conflict of interest, and it concerns the Black Country LEP and Housing and Land Use, a key responsibility of the WMCA.

The Black Country LEP consists of 13 members (all male). It comprises 7 executives of private companies, 4 Council leaders, all Labour (Councillor Sean Coughlan, Walsall; Councillor Steve Eling, Sandwell; Councillor Roger Lawrence, Wolverhampton; Councillor Peter Lowe, Dudley), and Professor Geoff Layer, Vice-Chancellor of the University of Wolverhampton and Lowell Williams, Principal of Dudley College of FE. Councillor Coughlan holds the CA Cabinet Portfolio for Housing and Land.

The Black Country LEP has bid for and received some £500 million from the CA for investment in land, according to the minutes of a meeting of the BC LEP Partnership Board on 21 November 2016.

130/16 Policy Update

The Board received an update on the following policy items: –

  1. Land Commission – Land Remuneration Fund – Submission

The meeting received details of the Land Commission submission by the Black Country (BC) LEP, prepared jointly with BC local authorities, Call for Evidence was submitted to the Combined Authority (CA) Investment Fund. It was noted that the BC programme was now in excess of £300 million of potential investments and the CA had made a commitment to use £200 million of its own funds for brownfield land treatment.

Some of the members of the BC LEP have a direct interest in investment in land for construction. The Chair of the BC LEP is Simon Eastwood, Managing Director of Carillion Developments, Carillion Plc. Carillion plc is a British multinational facilities management and construction services company with its headquarters in Wolverhampton. It is one of the largest construction companies operating in the UK. (Among its projects in the West Midlands is the redevelopment of Paradise Circus in Birmingham city centre.)

The WMCA is “Further developing facilities such as the Wolverhampton [University] Construction Campus and the Construction Training Centre at Dudley [FE college] to ensure the availability of a skilled workforce to deliver increased housebuilding.” Professor Geoff Layer, Vice-Chancellor of the University of Wolverhampton, and Lowell Williams, Principal of Dudley College of FE, are also members of the Black Country LEP Board.

We are not saying there is any evidence of improper conflict of interest here. What we are saying is that, in view of the House of Commons Public Accounts Committee’s damning indictment that “LEPs are not meeting basic standards of governance and transparency, such as disclosing conflicts of interest to the public”, are public interests in the independence and effectiveness of the WMCA’s Scrutiny of Housing and Land policies in the Black Country best served by having as a member of its Scrutiny Committee someone who is so closely involved in these policies as a member of the BC LEP?

The BC LEP and Carillion, guilty of blacklisting trade unionists

There is one final issue of concern about the BC LEP. Its Chair is Managing Director of Carillion. Carillion is one of the big construction companies which have recently been found guilty of operating a blacklist of trade union activists. According to the Hazards Blacklist Blog, 16 May 2016:

Blacklisting firms face a £75m bill

Eight of the country’s biggest construction firms have agreed to pay an estimated £50m in compensation to blacklisted workers, equating to an average payout of £65,000 to each of the 771 workers.

Some of the agreed payments to workers victimised for their union and safety activities are thought to be in excess of £200,000. Legal fees are estimated to run to around £25m for the long-running legal case, scheduled to go before the high court as the 9 May settlement deal was finalised.

Balfour Beatty, Carillion, Costain, Kier, Laing O’Rourke, Sir Robert McAlpine, Skanska UK and Vinci settled the outstanding 256 cases with the union Unite for £10,435,000. Construction union UCATT then revealed it had secured £8.9m on behalf of the 156 cases it took for its blacklisted members. GMB said it settled at £5.4m for 116 blacklisted workers, plus £3m of legal costs under a deal struck last month.

And law firm Guney, Clark and Ryan is understood to have secured £6.6m for 167 victims it represented.

Unite general secretary Len McCluskey said: “The massive scale of the agreed damages – more than £10 million – shows the gravity of the misdeeds of these major construction companies which created and used the Consulting Group [Association] as a vehicle to enable them to blacklist trade unionists on behalf of more than 30 construction companies. The sums to be paid out go a considerable way to acknowledge the hurt, suffering and loss of income our members and their families have been through over many years.” (http://www.hazards.org/blacklistblog/)

Again we would ask, can we be confident that such practices would be brought to the public attention of the WMCA Scrutiny Committee by a representative of the BC LEP of which the managing director of Carillion is the chair?

In the absence of an elected Assembly the Scrutiny Committee is the only instrument of public accountability of the WMCA. Its credibility depends on there being no suspicion in the public mind that there are actual or potential conflicts of interest. For that reason we believe there should be no representatives of LEPs on the Scrutiny Committee.

Richard Hatcher

11 January 2016

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