Source · Select Committees · Housing, Communities and Local Government Committee
Sixth Report - Funding for Levelling Up
Housing, Communities and Local Government Committee
HC 744
Published 26 May 2023
Recommendations
3
Rejected
Para 18
Require Government departments to identify and DLUHC to clarify Levelling Up funding contributions.
Recommendation
If Levelling Up is to remain the Government’s flagship policy, as it has described it, its delivery must involve greater co-ordination and oversight across Government where applicable. The Government must get to grips with setting out which funding streams are …
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Government Response Summary
The government explicitly rejects the recommendation for greater co-ordination and oversight and for setting out specific funding streams contributing to levelling up, arguing it's a whole-of-government mission where such categorisation would be misleading. They assert that sustained joint working already exists, citing numerous initiatives and devolution deals.
Ministry of Housing, Communities and Local Government
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4
Accepted
Prioritise flexible revenue funding for local authorities and reduce bid-based allocations.
Recommendation
As a starting principle, local authorities who most require prioritising within the Levelling Up policy should be allocated money through revenue to achieve objectives that are in line with their local circumstances and need, with the appropriate monitoring and expenditure …
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Government Response Summary
The government highlights its published plan for simplifying the funding landscape and its commitment to launch a Funding Simplification Doctrine in 2024, which will encourage allocative approaches over competitive bids where suitable. It cites the UKSPF as a non-competitive fund with a mix of revenue and capital funding, empowering local leaders with flexibility.
Ministry of Housing, Communities and Local Government
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7
Accepted in Part
Para 27
Simplify Levelling Up funding streams, reduce competitive pots, and provide adequate core funding.
Recommendation
The Government must follow through on its commitment to simplify funding streams and reduce requirements to access competitive pots. The DLUHC must also seek to reduce the number of competitive funding pots. By reducing the number of such pots, by …
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Government Response Summary
The government highlights its published plan for simplifying the funding landscape and its commitment to launch a Funding Simplification Doctrine in 2024, which will guide departments on funding methodologies, including allocative approaches where suitable. It points to the UKSPF as an example of formula-based allocation rather than competition.
Ministry of Housing, Communities and Local Government
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9
Acknowledged
Para 31
Publish guidance on providing timely, detailed, and consistent feedback for all funding bids.
Recommendation
We recommend that the DLUHC provides better guidance on how it will provide feedback on bids. The guidance must set out that feedback is timely, detailed, and consistent. This is especially important for levelling up funds as the quality of …
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Government Response Summary
The government states it is reflecting on lessons learned from past Levelling Up Fund rounds regarding feedback and will apply these lessons to future feedback approaches, but does not commit to specific guidance changes or public feedback.
Ministry of Housing, Communities and Local Government
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11
Accepted
Para 40
Encourage collaboration between communities and local authorities in competitive bidding processes.
Recommendation
The nature of competitive bidding can result in resentment between communities and similar neighbouring authorities across the country. Communities and local 38 Funding for Levelling Up authorities should be encouraged to work together, and the Government should be mindful of …
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Government Response Summary
The government acknowledges the administrative burden of competitive bidding and states the upcoming funding simplification doctrine will balance its approach. It commits to working with local authorities to ensure fair and transparent distribution of competitive funding and to encouraging collaboration, citing existing capacity grants and provisions for joint bids in the Levelling Up Fund.
Ministry of Housing, Communities and Local Government
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13
Accepted
Para 49
Prohibit DLUHC from introducing additional metrics, or mandate public communication of changes.
Recommendation
Throughout all future competitive bidding processes, the Government must avoid introducing additional metrics for success once an application process has closed. If, for any reason, this becomes unavoidable, the DLUHC must communicate this change via official and public channels of …
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Government Response Summary
The government refutes the claim of introducing new metrics, stating its decision-making framework was published at the outset. It adds that it has provided £65 million in additional funding to support local authorities with project development, including adapting to inflation impacts.
Ministry of Housing, Communities and Local Government
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15
Acknowledged
Ensure Investment Zone policy stability to prevent wasted resources for local authorities.
Recommendation
The Investment Zone policy geared local government up to the prospect of additional funding before the goalposts were moved. Whilst we appreciate that policies sometimes necessarily evolve over time, every effort must be made to ensure that a similar situation …
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Government Response Summary
The government acknowledges the policy shift for Investment Zones was due to a new administration and states that, in the refocused policy, the department tried to minimise wasted effort for local authorities.
Ministry of Housing, Communities and Local Government
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17
Accepted
Para 64
Require DLUHC to utilise local government data expertise and ensure clear data sources.
Recommendation
The DLUHC should not seek to fix something which is not broken. Rather than outsourcing the collection of new data sets, the Department should have called on the expertise of bodies such as the Local Government Association and offices within …
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Government Response Summary
The government defends its data collection approach, explaining that its chosen indicators align with Levelling Up Fund interventions and that data sources are primarily government statistical releases, with links provided in published methodology notes. It states it chose to gather data from original sources rather than relying on aggregated data.
Ministry of Housing, Communities and Local Government
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19
Accepted
Para 66
Publish DLUHC departmental and combined authority expenditure data for public monitoring.
Recommendation
One of our core tasks is to monitor the policy of the DLUHC and without sufficient data we are limited in our ability to do so. We are concerned that the lack of accessible data was not foreseen or resolved …
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Government Response Summary
The government outlines ongoing efforts to make data publicly available, including through the Subnational Indicators Explorer and a subnational expenditure project. It also states that an Annual Report on Devolution will be published by March 2024, and the Levelling Up and Regeneration Bill will mandate annual progress reports.
Ministry of Housing, Communities and Local Government
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21
Accepted
Publish annual data production plans and availability timelines for the SDU
Recommendation
The delay and lack of information regarding what the SDU is working on, what the Unit intends to produce and when these data sets will be available, is unsatisfactory. The DLUHC, via the SDU, must make clear at the start …
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Government Response Summary
The government outlines the Spatial Data Unit's (SDU) ongoing work to transform data use, including subnational expenditure projects, partnerships with the ONS for local statistics, and the development of public tools like the Subnational Indicators Explorer, updated quarterly. It highlights various published data outputs and collaborative efforts.
Ministry of Housing, Communities and Local Government
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26
Deferred
Commit to longer-term funding programmes beyond the current UKSPF 3-year cycle
Recommendation
The Government needs to find a way to provide certainty of funding for a period of time which is more than the three years under the UKSPF. We have seen in the local government sector what a detrimental effect short-term …
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Government Response Summary
The government states the UKSPF aligns with the three-year Spending Review cycle and will continue to consider feedback on longer-term funding during preparations for the next review.
Ministry of Housing, Communities and Local Government
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29
Accepted
Para 104
Ensure ongoing, detailed, and sufficient DLUHC engagement with Devolved Governments on funding distribution
Recommendation
Where the DLUHC is seeking to provide funding in [policy] areas that are generally understood to be devolved, it is critical that the Department works hand in glove with the Devolved Governments. As such, through good communication and close collaboration, …
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Government Response Summary
The government describes its existing and past close collaboration with devolved administrations on Levelling Up, citing examples like joint Freeport announcements, seeking input on the Levelling Up Fund, and developing bespoke interventions for the UKSPF, asserting it is already working closely across the UK.
Ministry of Housing, Communities and Local Government
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31
Accepted
Engage with Northern Ireland officials through existing structures, ensuring Section 75 compatibility.
Recommendation
In the future, the DLUHC must make sure that its engagement with officials in Northern Ireland is compatible with section 75 of the 1998 Northern Ireland Act, so 42 Funding for Levelling Up that in the absence of an Executive, …
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Government Response Summary
The government outlines existing measures to ensure engagement with Northern Ireland officials is compatible with Section 75 of the 1998 Northern Ireland Act, including requiring UKSPF applicants to describe project impact and using MoUs for the Levelling Up Fund, while acknowledging the challenge of a non-functioning Executive.
Ministry of Housing, Communities and Local Government
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34
Accepted
Adopt a sustained, long-term approach to Levelling Up with secure, ongoing funding.
Recommendation
We note the significant cross-party consensus there appears to be for the challenges that the Levelling Up policy is seeking to solve. We recommend that future Governments take a more sustained and long-term approach to levelling up matched by ongoing …
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Government Response Summary
The government states that the Levelling Up policy is already a long-term program, with missions set until 2030 and provisions for continuation beyond. They also reference a simplification plan to streamline funding and reduce duplication, claiming existing efforts address the recommendation.
Ministry of Housing, Communities and Local Government
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Conclusions (20)
1
Conclusion
Rejected
Para 16
We are yet to see any evidence of sustained joint working between Departments, and the coordination of the various funding pots they control, which are intended to contribute towards the ambitions of the Levelling Up White Paper. The Department for Levelling Up, Housing and Communities is responsible for overseeing the …
Government Response Summary
The government explicitly disagrees with the committee's conclusion, stating that Levelling Up is a whole-of-government mission where all spending contributes. It highlights extensive joint working across departments and with local actors through various initiatives, including devolution deals, partnerships, and Investment Zones.
2
Conclusion
Rejected
Para 17
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.
Government Response Summary
The government rejects the committee's conclusion, stating that local government's Core Spending Power has seen a real terms increase between 2019-20 and 2023-24. It clarifies that Levelling Up funds are not intended to duplicate core funding and cites the UKSPF as a predominantly revenue-based programme that offers local authorities flexibility.
5
Conclusion
Accepted
Para 25
The Levelling Up White Paper committed the Department to simplify funding streams and reducing the requirements to access competitive bidding. Despite this, we have seen limited evidence that any progress has been made on these objectives to date. Furthermore, the evidence we received on competitive funding has indicated the challenges …
Government Response Summary
The government states it published a plan on 4 July 2023 for simplifying funding and will launch a Funding Simplification Doctrine in 2024 to guide appropriate distribution methodologies. It also highlights the UK Shared Prosperity Fund which provides formula-based allocation rather than competitive bidding.
6
Conclusion
Accepted
Para 26
It was made clear by our witnesses that competitive bidding is a resource intensive and costly activity. This can create barriers for stakeholders and communities in need of funding. Whilst limited funding was provided for some local authorities in the Funding for Levelling Up 37 Levelling Up Fund round one …
Government Response Summary
The government outlines its plan for simplifying the funding landscape, published on 4 July 2023, and commits to launching a Funding Simplification Doctrine in 2024. This doctrine will assess the most suitable distribution methodology, encouraging allocative approaches where appropriate to minimize demands on local authorities.
8
Conclusion
Accepted
Para 30
We heard evidence which brought into question the extent of support provided to applicants or unsuccessful applicants by DLUHC. There is a wide gap in perception between the quality of feedback the DLUHC said it had provided and the quality of feedback applicants said they had received. DLUHC does not …
Government Response Summary
The government confirms it provided feedback to unsuccessful applicants in both rounds, improving the process in round two by providing detailed written feedback based on lessons learned from round one. They note receiving positive feedback on the round two process.
10
Conclusion
Acknowledged
Para 39
We acknowledge that in certain circumstances competitive bidding can also foster collaboration across local government. However, it can also encourage local authorities to develop plans or projects it perceives Whitehall will value to secure funding, rather than to deliver what their local communities may have prioritised.
Government Response Summary
The government acknowledges the administrative burden of competitive bidding and confirms that a simplification plan will balance their approach, committing DLUHC to work with local authorities for fair and transparent distribution. They also highlight existing measures like capacity grants and support for joint bids, affirming that local priorities are tested in funding assessments.
12
Conclusion
Rejected
Para 48
A further concern regarding the distribution of competitive funding was the additional metrics for success applied to once applications had closed in round two of the Levelling Up Fund. This was signally unhelpful for perceptions of trust and transparency and leaves the Government open to criticisms that it has not …
Government Response Summary
The government denies that additional metrics were applied after applications closed in round two, stating the decision-making framework and all five wider considerations were outlined in the published Prospectus and Technical Note prior to submissions. They assert a robust and transparent process was followed.
14
Conclusion
Acknowledged
Para 53
We heard that an Investment Zone expression of interest costs in the region of £50,000 for one application. Since the Government’s Growth Plan 2022, little to no updates have been provided on the future of Investment Zones until the Budget in March 2023. Although we welcome the Government’s decision to …
Government Response Summary
The government acknowledges the work councils put into previous Investment Zone applications, stating this effort was not wasted but informed policy development for the refocused program. They explain the decision to limit the number of zones and eligible areas, noting other levelling up opportunities are available for non-Mayoral Combined Authorities and that the list of areas will be kept under review.
16
Conclusion
Rejected
The Index for Multiple Deprivation (IMD) has for a long time been widely considered to be the most efficient way of determining ‘need’. As such, we do not agree with the DLUHC’s decision to move away from the use of the long established IMD to determine priority areas one to …
Government Response Summary
The government rejects the premise that IMD is a 'one size fits all' solution, stating their chosen indicators align better with Levelling Up Fund interventions. They clarify that methodology notes and links to data sets for both rounds are publicly available on gov.uk, including a proprietary commercial vacancy rate made public.
18
Conclusion
Accepted
Para 65
We are concerned about the DLUHC’s lack of sufficient data on all aspects relating to levelling up. The Department has acknowledged that it lacks data of sufficient quality about Government department’s expenditure on the full range of levelling up funds. It also lacks data on combined authority income and expenditure. …
Government Response Summary
The government acknowledges data concerns but states good progress is being made on metrics, with new data publicly available. They also note the Levelling Up and Regeneration Bill will require annual reports and DLUHC is working to publish subnational expenditure data, with an annual report on devolution due by March 2024.
20
Conclusion
Accepted
Para 67
The DLUHC’s solution to its lack of data appears to have been the creation of the ‘Spatial Data Unit’ (SDU). The SDU was set up over a year ago and since then we have sought to understand the work of this unit and their forward plan. However, it remains unclear …
Government Response Summary
The government clarifies that the Spatial Data Unit (SDU) is transforming data use for place-based decision-making and is already producing granular data, such as LSOA Gross Value Added (GVA) and improved R&D expenditure estimates. The SDU is also supporting the Subnational Indicators Explorer, which is updated quarterly.
22
Conclusion
Accepted
According to the Financial Times, concerns about the DLUHC’s ability to deliver ‘value for money’ have been raised by the Treasury. Despite DLUHC’s efforts to reassure us, the Treasury’s decision to remove DLUHC’s ability to sign off on capital expenditure is a significant concern. The DHLUC needs to make clear …
Government Response Summary
The government clarifies that the change in capital expenditure sign-off only relates to new projects and has no implications for DLUHC's budgets, policy objectives, or the delivery of Levelling Up. They cite recent funding announcements as evidence of continued investment.
23
Conclusion
Rejected
Para 82
We have heard from representatives from the Welsh and Scottish Governments, officials from Northern Ireland, and from English local authorities, all of which have said that the UK Shared Prosperity Fund (UKSPF) was not a sufficient replacement for previous European funding. However, the DLUHC has assured us that the UKSPF …
Government Response Summary
The government rejects the conclusion that the UK Shared Prosperity Fund is not a sufficient replacement for EU funding, stating that total UK-wide funding will at least match previous EU structural fund receipts by 2024-25. They explain their calculation methodology and highlight engagement with devolved administrations on bespoke allocation.
24
Conclusion
Acknowledged
Para 83
We do not have sufficient data regarding how calculations have been made, the information we do have from central and the Devolved Governments are also not comparable in their current form. However, the number of stakeholders and local government bodies which have told us UKSPF is not a sufficient replacement …
Government Response Summary
The government reiterates that its UKSPF funding methodology was published in 2022 and claims engagement with devolved administrations took place. It states it will seek to improve engagement and collaboration on any future funding, but maintains current funding is sufficient.
25
Conclusion
Deferred
Para 84
One criticism of the UKSPF, which has been reiterated is that funding is only allocated for 3 years. In comparison, previous EU funding was allocated over 7 years. The shorter time frame for this replacement fund has caused difficulties for many organisations who require a longer term in which to …
Government Response Summary
The government notes the UKSPF's alignment with the three-year Spending Review cycle and states it will continue to consider feedback about longer-term funding allocations during preparations for the next Spending Review.
27
Conclusion
Accepted
Para 102
The DLUHC has told us that it consulted with the Devolved Governments on the creation, compatibility, and implementation of the levelling up funds. However, we have heard from the Scottish and Welsh Governments, and officials from the Northern Ireland Executive, that they have not been satisfied with the level of …
Government Response Summary
The government acknowledges shared goals with devolved administrations and outlines its existing close working relationship and consultation efforts across various levelling up initiatives, including joint Freeports, seeking advice on the Levelling Up Fund, and engaging on UKSPF interventions.
28
Conclusion
Accepted
Para 103
We have also heard from the Scottish and Welsh Governments, and officials from the Northern Ireland Executive, that levelling up funding was not always compatible with devolved policy and that the method of distribution was not appropriate. The Multiply fund is an example of the UK Government not providing value …
Government Response Summary
The government acknowledges shared goals with devolved administrations and asserts they are working closely across various levelling up areas, citing examples like joint Freeports, and consultations on the Levelling Up Fund and UKSPF to agree bespoke interventions and align with priorities. They do not directly address the specific "wasteful" criticism of the Multiply fund.
30
Conclusion
Accepted
Para 105
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 and speaks to an on- going theme we found throughout this inquiry regarding the extent of consultation carried out by the DLUHC with Devolved Governments …
Government Response Summary
The government acknowledges the importance of Section 75 considerations for Northern Ireland. They state that for UKSPF, applicants must describe impacts and collect data on protected characteristics, and they will further embed these considerations. For the Levelling Up Fund, they explain that Memorandums of Understanding were used to ensure compliance with Section 75 principles and allow official engagement without legal risk.
32
Conclusion
Accepted
Para 109
The Government’s flagship Levelling Up policy is one in a long line of local growth initiatives. The National Audit Office reported that since 2010 there has been the repeated introduction of ‘new’ local growth policies. The stop-start character of local growth initiatives has arguably slowed or even in some case …
Government Response Summary
The government acknowledges the historic stop-start approach to local growth and states that Levelling Up is a long-term programme, with the Levelling Up and Regeneration Bill enabling missions to continue beyond 2030. It also refers to a recently published simplification plan to improve the current funding system.
33
Conclusion
Acknowledged
Para 110
Based on the evidence we have received and given the historic frequent churn of local economic growth initiatives, it can be argued that levelling up is unlikely to be successful in achieving the objectives it seeks to address. The challenges levelling up seeks to resolve are complex and cannot be …
Government Response Summary
The government acknowledges the concern regarding previous short-term initiatives, asserting that Levelling Up is a long-term programme with 2030 missions and legislative backing to continue beyond. It also notes efforts through a simplification plan to streamline funding and reduce administrative burdens.