London Development Agency: breaking up is hard to do

Ben Walker, Regeneration & Renewal, 25 July 2008

"Scandal of the missing millions," thundered the front page of the London Evening Standard.

The report on which it based the headline was an investigation into the London Development Agency by the Forensic Audit Panel. The four-strong team was commissioned by London's new mayor, Boris Johnson, to investigate allegations of corruption and incompetence in the mayor's economic development agency during the reign of his predecessor, Ken Livingstone. At the centre of the probe was Lee Jasper, Livingstone's adviser on equalities and policing. Jasper was accused by the Evening Standard of exerting undue influence on LDA grant-making by asking it to fund favoured projects despite them having little economic dividend.

During the run-up to the mayoral poll in the spring, the Standard published a story on the LDA almost every night. Stories alleging that Jasper had misused LDA funds to support projects run by his friends, and that parts of the mayor's defence of Jasper had been factually flawed, lent a whiff of scandal to the most high-profile local government election in decades. They also gave unprecedented - although extremely negative - publicity to one of the regional development agencies, bodies that rarely command more than the odd column inch in the national press. Johnson was elected amid the stink, and within days he had effectively sacked LDA chief executive Manny Lewis and chair Mary Reilly by recommending that they stand down.

Audit panel chair Patience Wheatcroft now says that it was not corruption, but incompetence, that was the main cause of the alleged waste at the LDA. Nowhere in the report does it accuse the body, or anyone in the mayor's office, of corruption. Instead, Wheatcroft diagnosed flaws in the LDA's leadership and governance, as well as a desire to do too much. This prompted Wheatcroft and her colleagues to urge a wholesale scaling-back of the LDA's role after concluding in their report that the LDA board under Livingstone was "ineffective".

The panel found:

- Failings in the LDA's leadership, governance and basic controls.

- That these failings contributed to the allegations of fraud and corruption.

- Leadership shortcomings also contributed to a failure to develop appropriate monitoring systems and share best practice.

- Shortcomings in the board's structure and its activities.

- A failure to deliver value for money.

In an interview with the Standard, Wheatcroft went further: "Our investigations have left us in no doubt that money has been misspent on a massive scale, say tens of millions." Livingstone's bete noire, the Standard's reporter Andrew Gilligan, seized on the report and described the LDA as a "disaster".

Yet these assessments contrast with those of public sector watchdog, the Audit Commission. Its March report said that the LDA was performing well on all key financial management criteria and was offering good value for money. The report added that the LDA had made an effective contribution to the Olympics and in bringing world class sport to London. In most of the agency's priority policy areas, results were found to be improving.

Room for improvement

The Audit Commission did find faults with the LDA. In particular, it noted that there were a number of "non-trivial errors" in its draft annual accounts and that its human resources system denied managers easy access to absence and sickness data. Yet these flaws were offset by successes, such as an exemplary approach to explaining the agency's goals and achievements to outsiders. Overall, the commission deemed the LDA worthy of three marks out of a possible four on all of the criteria it uses to audit public bodies.

"I was a bit surprised that there was no mention (in the Wheatcroft report) of the LDA's existing audit regime and who its auditors were," says the chief executive of another regional development agency. "While (the report) was policy-focused, it may have been politically driven."

Nonetheless, this chief executive accepts that the Wheatcroft report does contain key lessons for the RDA network on the importance of effective project monitoring and robust governance. But he is not the only person who suspects that the report was not entirely impartial. Many other sources are keen to point out that two of the four panel members are Conservative councillors. Wheatcroft herself is the former editor of the Tory-supporting Sunday Telegraph and was embroiled in a Westminster village squall when a columnist for the paper publicly denounced her for removing a number of paragraphs criticising David Cameron from his column. "I think this report will come to be seen as a bit of grubby score-settling of a political nature," says former LDA board member John Biggs, a London Assembly Labour member. One senior regeneration professional working on Olympic Park says: "I suppose she's done her job. Boris is the Evening Standard's man and she's got them their column inches."

The Wheatcroft panel's recommended overhaul of the LDA would herald the end of the body's role in running regeneration projects. Under the plan, the LDA would act as a paymaster that funds London's borough councils, charities and businesses to deliver regeneration projects in exchange for hitting LDA targets. Much of the LDA's regeneration project management staff would be redeployed to the bodies running regeneration projects in the capital.

It is not just the Labour group that has raised concerns with this plan. Sian Berry, the Green Party's mayoral candidate in 2008, worries that the boroughs might absorb some of the cash for regeneration delivery to reduce the tax burden on their residents. "Remember that the London (councillors) are trying to get re-elected in 2010," she says.

Professor Tony Travers, director of the Greater London Group at the London School of Economics, also expresses reservations about the Wheatcroft plan: "The fact that two of the people on the panel were borough leaders means the recommendation, while not necessarily rendered invalid, is not surprising," he says. "But there are specific (regeneration) needs across London that the boroughs would not be able to meet."

The borough question

Indeed, there is already some evidence that the boroughs themselves may not feel best placed to meet those needs. One regeneration director in a London borough is concerned that devolving the management of regeneration to 32 separate council regeneration teams rather than using a single central team at the LDA would be inefficient and go against the point of having strategic government for London. "If we break it all up, we would create diseconomies of scale," says the source. "The whole concept of the LDA was to have a London-wide body, and that concept was the right one."

Michael Ward, who as its chief executive between 2000 and 2004 helped to set up the LDA, warns that a plan calling for a system in which the LDA funds boroughs to deliver projects of strategic importance to London ignores the fact that some of the projects will be opposed by the boroughs in which they are located (see box).

So what of the mayor himself? Johnson could have used the report to throw juicy chunks of his predecessor's flesh to the Ken-hating leaders of London's Tory boroughs. Yet City Hall's reserved response to the report is already being interpreted as the mayor distancing himself from Wheatcroft's recommendations. "It was always an independent panel and no decision has been made about its recommendations," says the mayor's spokesman. "The panel wasn't set up to decide what the mayor will do." That said, the LDA announced this week that it will shed around a quarter of its jobs, although in what areas will not be clear until September.

But a senior regeneration professional who used to work at the LDA but who has since moved on believes the Wheatcroft recommendations are simply "too extreme" for the mayor to implement in full. "I suspect it's extremely unlikely he will accept the headline recommendation," the source says. But he adds that the audit - reported more as fact than assertion by the Evening Standard - could be a useful foundation for the mayor to tweak the LDA in his own image: "It effectively gives Boris a mandate to do whatever he likes to the LDA."

Back at City Hall, John Biggs says he has had private conversations with the mayor urging him to avoid launching a wholesale restructure of the LDA on the recommendation of a panel that is seen by many in the sector as partisan and by some as ill-informed. After a difficult start to the mayoralty in which Johnson's team advised him to hire deputy mayors who he had to sack, Biggs says the mayor wants to make more of his own decisions. "Boris has realised that he has to escape from the clutches of his incompetent advisers," he says. "Just as he is learning not to listen to the nutters from Central Office, I think it's unlikely he will (implement Wheatcroft's proposals)."

Travers too is reluctant to forecast that the mayor will voluntarily reduce his own power by scaling back the role of the LDA. "I suspect," he says, "that the mayor will now be thinking long and hard about whether this is power he really wants to give away."

- See Leader, p17.

FORMER LDA CHIEF: BORIS SHOULD BEWARE THE WHEATCROFT PLAN

Patience Wheatcroft's plan to devolve the LDA's regeneration delivery function to London's boroughs ignores the point of city-regional government: that some schemes of strategic importance to the whole metropolitan area may be opposed by the boroughs in which they are located, says Michael Ward, chief executive of the LDA between 2000 and 2004, and the current chief executive of the British Urban Regeneration Association. The Wheatcroft report deals with events at the LDA that almost exclusively occurred after his departure.

"One of the biggest conflicts I had when at the LDA was with the leader of Lambeth council when the LDA decided to fund refurbishment of the Royal Festival Hall. The leader said to me: 'If you want to spend money in my borough, you must come and discuss it with me'. Yet this was a strategic project that benefited all London, and using our London-wide funding was the right thing to do.

"The truth is that there are always decisions on schemes, such as airports and wholesale markets, that do have to be taken and are never going to be approved by the boroughs. There are always London-wide issues and a London wide agenda, and that doesn't alter just because there is a change in control at City Hall."