Funding for Levelling Up – Report Summary

Summary

The Government’s flagship Levelling Up policy is a key local growth initiative which has the potential to transform the lives of people across the UK. The Government’s Levelling Up White Paper (2022), published by the Department for Levelling Up, Housing and Communities (DLUHC), sets out the Government’s objectives to reduce geographic, economic, social and health inequalities. The Levelling Up policy, and the challenges it seeks to address, have been widely welcomed across the political spectrum.

However, the method of delivering funding, the allocation process, and the extent to which different funds have been compatible with the needs of communities in the short and long-term is creating several obstacles for the policy’s success.

The dearth of data available from the DLUHC is an area of serious concern. DLUHC has conceded that it does not have “sufficient data” in relation to Whitehall departmental expenditure on the full range of levelling up funds or on combined authority income or expenditure. We cannot understand how the DLUHC can make significant policy decisions either in relation to priority areas, funding allocations or the measurement of the success or failure of the Levelling Up policy in achieving its objectives if there is not adequate data to support these tasks.

The White paper also commits DLUHC to reducing the requirements to access competitive bidding and simplifying the funding landscape. Despite these commitments, we have seen limited evidence that any progress has been made on these two objectives to date.

The evidence we received on competitive bidding has indicated the challenges associated with funding for levelling up is far greater than those outlined in the White Paper. Local authorities’ revenue funding has reduced significantly since 2010. Levelling up funds generally do not replace grant funding because first they are capital not revenue and; second, because they cover specific projects rather than necessarily covering the priorities of the local authorities.

The Levelling Up Fund has held some merit in the funding of one-off projects across the country. However, due to the questionable use of metrics in the first round and the additional metrics for success in the second, the management of this fund has ultimately contributed to diminished perceptions of trust and transparency. This mismanagement has left the Government open to criticisms that it has not made funding decisions based on need or, indeed merit.

The Investment Zone policy was re-opened and re-framed after it was reported that over one hundred applications were submitted for the first iteration of the policy. This change in approach and re-framing of the original policy after submissions had been made, speaks to a significant waste of local authorities’ resources at a time when resources are finite. This departmental process brought about by “ministerial changes in the weather” and a prescriptive approach in outlining areas that could bid for the latest policy, raises questions around the transparency of the process DLUHC is applying to such initiatives.

Throughout our inquiry the DLUHC has told us that it had consulted with the Devolved Governments on the creation, compatibility, and implementation of the levelling up funds including the UK Shared Prosperity Fund. In contradiction to the DLUHC’s evidence, the Devolved Governments said there had been a stark lack of meaningful consultation and engagement. This lack of consultation is arguably supported by the apparent lack of compatibility most of these funds have in Scotland, Wales and Northern Ireland. Moreover, the lack of consideration for the circumstances in which the Executive and its officials in Northern Ireland operate is of even greater concern to us. There is an overwhelming sense that the DLUHC is unwilling to collaborate and adhere to devolved agreements in which the Governments of Northern Ireland, Scotland and Wales operate.

Ultimately, the Government is right to prioritise the Levelling Up policy, but this laudable aim is unlikely to be successful given the Government’s current approach to funding. Funding the implementation of the Levelling Up policy is complex and challenging, as this report suggests. However, DLUHC does not know which pots of money across Government contribute towards levelling up, nor does DLUHC appear to have oversight of how these objectives can be delivered strategically through departmental co-ordination. As a result, the Government’s current approach is characterised by one-off short-term initiatives, and this will be insufficient if the geographic, economic, social and health inequalities are to be reduced and ultimately, overcome. To change this, the policy requires a long-term, substantive strategy and funding approach, things this policy currently lacks. Without such, Levelling Up risks joining the short-term Government growth initiatives which came before it.