There is much debate about the shift from a pattern of traditional local government to one of local governance, and about the impact of such a tendency on the effectiveness of governance processes and outcomes. This article argues that it is necessary in exploring such issues to bring together contributions informed by new institutionalist perspectives with others concerned with the political economy of neoliberalism. Partnerships are widely seen to be a significant element in the shift from government to governance, and the article focuses on the role of partnerships at both local (ie local authority) and neighbourhood level. Key questions about ‘local partnership governance’ concern its democratic legitimacy and the capacity of its institutions. Drawing on the examples of local strategic partnerships and the New Deal for Communities programme in England, it is recognized that such partnerships can appear to open up new approaches to legitimacy and new possibilities of enhancing the capacity of the local governance system. In fact, however, they are more likely to undermine democracy and accountability, and lack the capacity to be effective, while limiting local policy options to those consistent with New Labour’s neoliberal policy agenda.