Last year the Government committed to rationalise the byzantine number of funding streams which have been an ongoing concern for cash-strapped local authorities. Doing so would enable authorities to redeploy investment earmarked for competitive bidding and turn to more immediate priorities.
In the short-term, little has changed. Earlier this week, as part of its Anti-Social Action Plan, the government made £5m available for green spaces – which is on top of the £7m Levelling Up Parks Fund.
Last week the Government wrote to local authorities to inform them of a rule-change to the Shared Prosperity Fund, one week before it came into effect. To be clear, the change gives authorities greater flexibility over how they allocate investment, but the damage has been done as they've already set their priorities. This is exacerbated by the fact that in January authorities were given eight weeks to spend the first tranche of the Shared Prosperity Fund – rather than 12 months.
Less than a fortnight ago, the Government provided a one-year top-up of £200m for pothole funding which, though welcome, does little to address the estimated £12 billion pothole backlog. The trailblazer deals in Greater Manchester and the West Midlands are an exception: their investment is more significant which is a step in the right direction.
Beyond the number of funding streams that continue to proliferate, their short-termism and their inadequate scale, there is significant variation between how they're measured and what incentives they promote. This adds greater complexity to an already complex landscape.
For example, there is an expectation that Investment Zones are matched with private sector investment – which is sensible – yet this doesn't apply to other funding streams. The Shared Prosperity Fund disincentivises it, despite its predecessor securing €10bn from matching-funding over seven years. And this pick-n-mix approach is at odds with international evidence from Sweden to Spain in IPPR North's recently published State of the North report, which highlights that public-private partnerships are essential to long-term economic growth.
Next, there is a question mark over how funding streams are assessed. The new £200m in regeneration funding announced in the Budget was allocated to authorities that were unsuccessful in the second tranche of the Levelling Up Fund and its decision-making was opaque. Given the funding came via Michael Gove's departmental budget rather than the cross-departmental Levelling Up Fund, submissions for investment in culture and transport – the preserve of other departments - were ineligible for funding in the Budget.
Meanwhile, the Department also confirmed that it ‘de-selected' five submissions to the Levelling Up Fund – three from the North West, two from London. It re-selected the North West submissions after playing musical chairs with its funding envelope, but the Government has not published the names of the authorities that lost out.
On top of this, while the Levelling Up Fund was over-subscribed and submissions for better transport connectivity were rejected, the Department for Transport reported underspends on transport infrastructure because of ‘political uncertainty' and inflation. This lack of join-up suggests that the Government's commitment to tackle regional inequalities is not yet cross-departmental.
The Government's treatment of underspends is incoherent too: its policy to clawback the Shared Prosperity Fund unless a ‘credible plan' is forthcoming is at odds with its commitment to ‘reprofile' lower-than-anticipated spending from the Levelling Up Fund into future years.
These features sit within a broader framework in which funding is directed according to multiple formulae: needs-based allocations, a competitive regime, ‘opt-in' or ‘light touch' options.
Despite the overdue promise to rationalise the existing patchwork of funding streams in order to provide authorities with greater certainty, the announcements at the Budget suggest that funding complexity is here to stay. It is unlikely that the Government will turn the dial in a meaningful way: this challenge is a weed that needs to be tackled at its root, rather than pruned.
In this context, it's difficult to avoid the conclusion – shared by the London School of Economics' Tony Travers - that funding for authorities lacks coherence and its poor and overlapping design has practical implications including undermining investment.
By atomising the funding required to tackle inequalities, decision-makers in Whitehall have a partial image of the challenges facing authorities.
Fixing this is essential and devolution must be part of the vision. It is not a silver-bullet to all the challenges authorities face, but it is an antidote to the centrally managed approach that is failing to deliver. There's significant public support too: recent participatory workshops hosted by IPPR North suggest that communities want a greater say over how money is spent on their behalf.
Through the trailblazer deals, the government has made meaningful progress on devolution. The priority now must be to build on that momentum and ensure that funding streams are devolved. Doing so will enable authorities – particularly in the north of England, where productivity is lagging – to support their communities, drive local and national growth and more effectively tackle regional inequalities.
Jack Shaw is a senior research fellow at IPPR North
