Post-pandemic economic growth: Levelling up Contents

3Funding Levelling up

A plan for levelling up

26.The Government’s plans for levelling up are wide ranging, and include, for example, large scale infrastructure spending and the obesity strategy (as set out in box 3 below). Although fighting obesity is a very worthy ambition, it is difficult to visualise how this-ties in with the spending of £27 billion on roads or forms part of a coherent strategy and plan for delivery. Former Conservative Industry Secretary, Lord Heseltine, suggested that the Government is:

throwing money indiscriminately at a whole range of projects with very little attempt to co-ordinate the results, and very little attempt to mobilise local strengths, and very little attempt to analyse the competitive challenges we face.43

Box 3 Levelling up: Government Submission to the Inquiry

  • We have launched the £4.8 billion Levelling Up Fund which will invest in infrastructure that improves everyday life across the UK.
  • We will launch the UK Shared Prosperity Fund in 2022 and have supported places with £220 million additional funding through the UK Community Renewal Fund to places prepare.
  • To reduce health inequalities, we have launched the obesity strategy and will provide an additional £100m in 21/22 to support people to achieve and maintain their weight.
  • We are boosting investment in Further Education and reforming the skills system to better align with employer demand and support productivity growth.
  • To improve infrastructure and connectivity, we are making the largest ever investment in motorways and A-roads worth over £27 billion and investing £5bn in Project Gigabit.

Source: BEIS Submission (LRS0082)

27.In its Report, Economic impact of coronavirus: the challenges of recovery, published on 8 September 2020, the Treasury Committee recommended that the Government needs to “clarify whether it is planning to close the productivity gap, the income gap, the gap in health outcomes, the gap in educational outcomes or all of these”. It added that the Government “needs to define the strategies it will use to close different imbalances: strategies to close productivity gaps may well be different to those aimed to close income gaps or those gaps in health outcomes”.44

28.The Institute for Government (IFG) identified that “being clear about what levelling up means in practice would help the government take its plans from a shopping list of policies to a coherent strategy”.45 Dr Gemma Tetlow, Chief Economist at the IFG, said that if the levelling up agenda is to be more than “just another round of upheaval and reinvention” of regional policies; then, the Prime Minister needed to be clearer about what he was trying to achieve and why existing policies and institutions had failed before.46 Marvin Rees, Mayor of Bristol, concluded:

A friend of mine is a senior Army officer. He says, “Make a plan, any plan. Just make a bloody plan.” We do not have one. We have no real coherent national framework with which to work. I do not [know] what we are pointing at, as a country, at the moment, and that undermines our ability to plan.47

29.In response to our question seeking clarification of the Government plans to achieve levelling up, the Minister for Regional Growth and Local Government, Luke Hall MP, could not outline the Government’s plan. Instead, he listed a number of different funds.48

30.The current available documents on the policy instruments the Government aims to use to level up—the Conservative Party Manifesto, its submission to this inquiry and the 2021 Queen’s Speech—show a wide ranging and disjointed programme of random policies from an obesity strategy, an increase in police officers, to funding on A roads and the creation of Freeports. Although these policies are all very interesting and welcome, it is difficult to see how they all tie together under one over-arching strategy. The cohesion of the whole has not been well described to identify how these fit together. If the Government is serious about levelling up and for it to be a substantive strategy rather than merely a slogan, it must spell out a coherent ‘plan’ as a matter of urgency.

31.We recommend that the promised Levelling Up White Paper sets out a coherent plan for levelling up. This must set out, in detail, a road map and timeline for the delivery of the wide range of policies proposed. Fundamentally, it must set out what problems and issues these policies are designed to address in terms of the levelling up agenda, both, as individual policy initiatives in their own right and collectively in how they fit together as part of the wider strategy to deliver the Government’s ambitious desire and commitment to level up.

Levelling up funds

Level of funding

32.In evidence to us, Minister Scully repeated the Government’s stated ambition of “improving the everyday life and life chances for people in underperforming places around the country”.49 The Government identified several sources of funding for levelling up in the Queen’s Speech.

Box 4: Levelling up (funding) commitments in the Queens Speech 2021

  • £4.8 billion Levelling Up Fund
  • £220 million Community Renewal Fund
  • £830 million Future High Streets Fund for 72 areas across England
  • £400 million “Strength in Places” Fund
  • £3.7 billion to build 40 hospitals and recruit 50,000 new nurses in England
  • increasing primary school funding to a minimum of £4,000 per pupil and secondaries to a minimum of £5,000 per pupil and boosting investment in schools by £14 billion through to 2023–23–an extra £840 per pupil
  • the Lifetime Skills Guarantee as part of the £2.5 billion National Skills Fund
  • rolling out T levels, investing £500 million a year
  • investing £5 billion in buses and cycle routes across England

Source: 10 Downing Street: Queen’s Speech Background Briefing Notes, 11 May 2021

33.Minister Hall explained these funds in more detail:

There are a number of different funds. The Levelling Up Fund is one of them, which addresses key physical aspects, town centres, road improvements and others. We have the Community Renewal Fund, which is addressing some of the more resource-based issues and targeting funding towards those deprived communities and ex industrial towns. We have the Community Ownership Fund. We have all the measures we are taking through the local government finance settlement and others.50

Minister Hall said of the Levelling Up Fund that it was “designed to deliver projects over the course of this Parliament” and “to really get cracking with levelling up” as people wanted to see tangible change in their communities.51

34.However, we identified widespread concern that the levels of funding committed to date to deliver the levelling up agenda were nowhere near adequate for the Government to deliver what it has promised. For example, John Harris, co-creator of the Anywhere but Westminster video series, told the Lords Public Services Committee inquiry into “Levelling up” and public services that levelling up seemed to be “more rhetorical than real”. To put it into context, he compared the £4.8 billion of the Levelling Up Fund to the money spent on ‘Test and Trace’52 and concluded that “it is chicken feed, really” which made him feel “less than convinced” by the ambition.53

35.Diane Coyle, Bennett Professor of Public Policy at Cambridge University, accused the Government of “tokenism” and said “I am a bit sceptical about to what extent these [funds] will make a difference. The scale of what we need to level up is enormous”.54 It has also been questioned whether the funding will come anywhere close to reinstating the funding available to local government pre-austerity. John Harris noted that the “the parlous state of local and city government” undermined the whole notion of levelling up:

Austerity is not over. I could take any one of a number of examples. Leeds City Council is about to cut £87 million from its annual budget. That is the biggest cut that it has ever faced.55

36.Civil Service World estimated that in 2011 almost £1 billion was taken out of the Greater Manchester area through austerity.56 The UK2070 Report identified that Barnsley was the area that has been hardest hit by austerity in percentage terms, with a 40% reduction in its day-to-day council spending since 2009/10, while Liverpool saw the deepest cuts per resident, with a reduction to council services’ funding of £816 per resident.57 Neil McInroy, Chief Executive of the Centre for Local Economic Strategies, highlighted that Regional Development Agencies had had a budget of around £2 billion a year for 12 years, which was “a total that is significantly greater than the current government’s Levelling Up Fund”.58

37.We challenged the Minister as to whether the allocated or promised funding to date would restore local government budgets to pre-austerity levels. Minister Hall told us:

I could not comment on the total amount that any individual local authority will receive after all the bidding processes are complete, naturally because we are going through assessment processes and it will depend on how successful they are in the course of that. There is clearly significant investment through the funds themselves.59

38.Despite its large-scale ambition and promised additional funding, it is unclear whether the levels of funding available to local areas (via levelling up) will equal, never mind exceed, historic levels of UK and EU funding to local government. Given the state of public finances following Covid-19, the Government should be realistic and clear about the scale of its levelling up ambitions.

39.Nor is it clear how levelling up is different to past regional policy and how it will therefore succeed in areas where previous regional policy has failed. Ministers offered no adequate response to this.

Competition for funding

40.The Industrial Strategy Council criticised the Government’s levelling up plans as “centrally controlled funding pots thinly spread across a range of initiatives”, and said that the historical evidence indicated that this was “unlikely to be a recipe for success”.60 Andy Haldane, Departing Chief Economist, Bank of England, and Chair of the now abolished Industrial Strategy Council, added that these central pots of funding “competitively bid for with deals being done with those most able to contribute [ … ] will most likely leave behind those already least advantaged”.61

41.Some funding sources under the Government’s levelling up agenda are available to regions based on applications—a form of competitive bids process, for example, the Levelling Up Fund itself, the Towns Fund, and the Community Renewal Fund. Lord Kerslake said to the Committee that funds for levelling up should not be given out by what he referred to as “short-term beauty parades” as it would not work.62 Marvin Rees Mayor of Bristol explained:

They put a bunch of money out there and say to us, “Fight for that.” It is a limited pot of money. We are in a zero-sum game with other authorities when we are trying to collaborate across the country. We cannot have that as an approach. That undermines our ability to fund.63

42.The competition for funding has led to criticisms of ‘unfair’ or ‘untransparent’ processes and ultimately to the claims of ‘pork barrel politics’ by some.64 The £3.6bn Towns Fund came under criticism from the Public Accounts Committee, which reported that:

The justification offered by ministers for selecting individual towns are vague and based on sweeping assumptions. In some cases, towns were chosen by ministers despite being identified by officials as the very lowest priority (for example, one town selected ranked 535th out of 541 towns).65

43.The Financial Times analysis of the Levelling Up Fund found that, in England, 14 areas that were wealthier than average were ranked in the most needy category and all had at least one Conservative MP.66 In April 2021, the Good Law Project took the first formal step in legal proceedings against the Government regarding both the Levelling Up and Towns Fund with the sending of a Pre-Action Protocol Letter. It stated:

The effect of the Defendant’s [Secretary of State for Housing, Communities and Local Government] unlawful approach is that areas where the Conservative Party has been, or wishes to be, electorally successful feature very highly… [in areas prioritised for funding].67

44.Minister Hall when asked about this told the Lords Public Services Committee:

I think that criticism in itself is grounded in politics and politicisation. You might often hear people making a point about an individual place, but you less often hear Opposition Members talking about how Blackpool, Newcastle upon Tyne, Sunderland or Manchester are on the priority list for all our funds.68

He argued that the majority of places that received funding—over 60%—were in opposition-held areas, which he believed helped to improve the Government’s relationship with these towns.69

45.The funding available to achieve levelling up is disparate and lacking any overall coherent strategic purpose or focus. Individual departments should be clear on what their contribution to levelling up will be in line with a clear strategy and agenda.

46.Funding for levelling up should be explicitly and directly linked to the identified issues that the Government are seeking to address, with clear metrics on what that money is seeking to deliver. There is an inequality in the capacity of local areas to bid for government funds. Whitehall should have mechanisms or procedures in place to ensure that it is not the most well-resourced authorities who are successful in securing funding. The Government needs to ensure that those without this capacity do not lose out, including ensuring appropriate funding is available for future rounds.

44 Treasury Committee, Eighth Report of Session 2019–21, Economic impact of coronavirus: the challenges of recovery, HC 271

47 Q134

48 Q20

49 Q1

50 Q20

51 Q21

52 A PQ stated that the overall budget for the programme is £22 billion, and the NAO’s estimate for the lifetime cost of the programme of £22,903 million (as of January 2021).

53 House of Lords Public Services Committee, “Levelling up” and public services, 17 March 2021, Q30

55 House of Lords Public Services Committee, “Levelling up” and public services, 17 March 2021, Q30

59 Q23

60 Industrial Strategy Council, Annual Report, March 2021

61 Policy Exchange, Making a Success of Levelling up, 28 June 2021

62 Q103

63 Q134

64 Good Law Project, Pork Barrel Politics, 5 April 2021 “Levelling Up Fund bias in favour of Tory seats ‘pretty blatant’” Financial Times, 5 March 2021Chris Hanretty, Professor of Politics at Royal Holloway, University of London, The pork barrel politics of the Towns Fund, October 2020

65 Public Accounts Committee, Twenty-Fourth Report of Session 2019–21, Selecting towns for the Towns Fund, HC651

67 Good Law Project, Pork Barrel Politics, 5 April 2021

68 House of Lords Public Services Committee, “Levelling up” and public services, 12 April 2021 , Q4

69 House of Lords Public Services Committee, “Levelling up” and public services, 12 April 2021 , Q4

Published: 22 July 2021 Site information    Accessibility statement