Growing pains

By Ann McGauran | 14 June 2022

The Government was accused a few years ago of outright pork barrel politics when many of the places selected for cash under the Towns Fund scheme turned out to be in Conservative marginals.

The resulting furore led to reports by the National Audit Office and the Commons Public Accounts Committee (PAC).

So has the Government taken steps to ensure that accusations of party-political machinations can no longer be made about its decisions on handing out money for levelling up?

A suspicious smell remains, in the light of the content of the PAC’s latest report on local economic growth. It has made stinging criticisms of the Government’s approach to awarding the first round of the Levelling Up Fund (LUF) and has recommended a raft of changes.

Last week’s report on a round that saw £1.7bn handed out to 105 pilots across the UK said ministers finalised principles for awarding funding only after they knew the identities and scores of the shortlisted bidders.

Chair of the PAC Dame Meg Hiller said that without ‘clear parameters, plans or measures of success’ it was hard to avoid the appearance that government is just gambling taxpayers’ money, ‘retrofitting the criteria for success and not even bothering to evaluate if it works’.

With eligible local institutions UK-wide having until 6 July to submit bids for the second round of the LUF, what does the Government need to do differently?

There was a reminder in the latest report that in 2019 the committee said the Government did not evaluate the impact of the £12bn Local Growth Fund, and that in 2020 it concluded that the way the Towns Fund bids had been chosen had not been impartial. ‘The Department (for Levelling Up, Housing and Communities), has past form with this,’ it said.

It has recommended that the department should set principles for awarding funding before ministers are given the identities of shortlisted bidders, and provide thematic and geographic transparency of successful and unsuccessful bidders in line with other targeted growth funding.

The Committee said it was ‘encouraging that evaluation features prominently in government’s Levelling Up White Paper and that the department is committed to improving its track record in this area’. But it added it was disappointing that it has not yet developed the promised overarching monitoring and evaluation framework for local growth. While it was pleased the department has now reversed its decision not to evaluate the Local Growth Fund, ‘designing an evaluation at the end of a scheme is not ideal’.

The report highlighted an ‘alphabet soup’ of funding pots to support regeneration in recent years. It said that with considerable uncertainty for councils around funding, structures and responsibility for local economic growth, the department and the Treasury should ‘set out how they intend to provide greater certainty to local authorities to enable them to plan the integrated capital, skills and community investment needed to drive growth in their areas’.

Responding to the report, Cllr Kevin Bentley, chairman of the Local Government Association’s People and Places Board, said: ‘Turning levelling up from a political slogan to a reality will only be achieved if councils have the powers and funding they need to address regional inequality, tackle concentrations of deprivation and make towns and communities across England attractive places to live, work and visit.

‘Competitive bidding for short-term, small pots of funding creates uncertainty and uses up vital resources in councils, which could be better spent on planning ahead for their communities.’

He added: ‘Timely, sustainable funding for levelling up, including the full rollout of UK Shared Prosperity Fund (UKSPF) allocations, alongside clear and measurable targets as specified in this report would go a long way to achieving local solutions to the national challenges we face and ensure all parts of the country are able to prosper in future.’

Does this report mean quick progress towards a system founded on an evidence base for interventions and transparency on selection criteria for bids is more likely? Chief executive of the national organisation for local economies CLES Sarah Longlands told The MJ: ‘I’m definitely not going to be holding my breath. It is deeply worrying given that we are now looking at the investment for the UKSPF. What’s the evidence that the Government is going to retrospectively ensure that those lessons have been learned for the UKSPF?’

The prospectus for the £2.6bn UKSPF was published in April, with the submissions window running from 30 June to 1 August. Each Local Enterprise Partnership (LEP) area in England will, by 2024-25, get a real terms match with the EU funding regime. Of the LEP region allocations, 70% will be distributed to local authorities according to population, and 30% will be allocated according to a needs-based index. Writing in The MJ last month, associate director of the Institute for Fiscal Studies David Phillips said the political attraction of this is that it would hide both the losers and the winners.

The PAC report said the department should set out how it will ensure the processes for awarding funding for future rounds of LUF and the UKSPF will address the prioritisation of devolved nations and how it plans to ensure ongoing engagement with the devolved administrations.

Returning to Ms Longlands, she said CLES is aware of confusion, particularly in the devolved administrations, about who they deal with. ‘Do you deal with Whitehall or do you deal with the Scottish or Welsh Government? I think the sense is that a local authority in Scotland almost feels it has to deal with Whitehall because you know they are going to be allocating the UKSPF. To what extent does that undermine the governance structures that have been set up under devolution? It seems to me the PAC report is asking questions about that as well.’

Danielle Mason is head of policy at the What Works Centre for Local Economic Growth. She told The MJ that evaluation of competitive ‘levelling up’ funding pots such as the LUF, the UKSPF and the Towns Fund needs to happen at two levels, where possible.

She said that firstly, it’s important to learn if a programme has had an impact as a whole, as ‘this will tell us whether the model of “competitive pots with local control over how the money is spent” is effective in delivering levelling up’.

‘Secondly, we need to learn whether specific funded interventions were effective. For example, did new pedestrianisation schemes actually increase footfall on the high street, and did businesses see higher turnover as a result? If we don’t answer these types of questions about specific interventions, then government will continue to have a limited evidence base to draw from when deciding that funding should be allocated in future.’

She sees the Government’s commitment to impact evaluation of individual interventions in the UKSPF Prospectus as a ‘good example of positive progress on evaluation from DLUHC’.

Dr Arianna Giovannini is associate professor in local politics and public politics at De Montfort University. She told The MJ that the issue of how local economic growth funding is allocated ‘is an absolutely essential one’.

On the LUF, she said: ‘Because the funding process is competitive in the first place, and the criteria are not clear, it means in practice it’s going to be the areas that are already performing better, that have the capacity also in terms of human resources behind putting together a bid that are going to perform better. And once they come to select the areas that can get funding, if the political element comes in, well of course the fund is not going to do what it’s promising.’

She concluded: ‘If levelling up becomes only a political slogan – something that just generates benefits at a political level rather than benefits for local areas – then that’s a different story from what was promised back at the 2019 General Election.’

The department has said the assessment process for the first round of LUF was ‘transparent, robust and fair’. One well-placed sector insider’s view is that in a perfect world government would set out the criteria for distributing funding in advance, and unless this happens then suspicions of outright political interference will continue to linger.

They believe it would be less hypocritical for the Government to say it is its job to decide where the funding goes rather than to pretend there is a formula – that could for example exclude deprivation factors – in order to justify a set amount of allocations. Political game-playing looks set to continue for a bit longer.

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Local economies PAC LGA Funding Levelling up