Selecting towns for the Towns Fund

The Department has a weak and unconvincing justification for not publishing any information on the process it followed, which does not vindicate its lack of transparency. The Department says that it did not reveal the detail behind its selection of towns so as not to raise local expectations about an unsuccessful town’s likelihood of success in the forthcoming competitive round, and so as not to distort local behaviour to enhance their likelihood of success, despite at that stage not yet having decided which towns would be eligible for the competitive round or how it would be conducted. The Department’s lack of transparency fuelled accusations of political bias in the selection process, and potentially is also a risk to the Civil Service’s reputation for impartiality. The Department exacerbated concerns by misrepresenting the National Audit Office’s report in statements to the press which said that the report concluded the selection process had been ‘robust’; when the report includes no such statement. Now the NAO has published the underlying information used by the Department’s officials to score towns, aspects of it are particularly interesting and we are pleased the Department has agreed to write to us with more detail on how the Department calculated the town-level scores, in particular around the risks from a no-deal Brexit. Recommendation: To avoid accusations that government is selecting towns for political reasons, the Department should be upfront and transparent about how it reaches funding decisions as the Towns Fund progresses, particularly the planned competitive round. The principle of openness and transparency should extend across the whole of government when it is selecting some local areas, but not others, to benefit from taxpayers’ money. 6 Selecting towns for the Towns Fund

It is unclear how much engagement and intelligence gathering, if any, Ministers held with local and regional representatives, to inform their selection of towns from the medium- and low-priority groups. Departmental officials assessed towns against three qualitative criteria using the knowledge of the Department’s area-based teams, rather than consult with local stakeholders, and collectively gave these criteria less weight compared with the quantitative criteria in its assessment. Similarly, Ministers decided they were better placed to make decisions themselves without seeking the views of local stakeholders, such as LEPs, local MPs and directly elected mayors, despite officials recommending to Ministers that they do so. The Department says that Ministers declined, in writing, to engage with elected mayors on the Towns Fund because they speak routinely with mayors on a range of matters that affect local areas. The Department believes that the necessary local partnerships are being developed through the new tier of governance—Town Deal Boards—being created to support planning and spending of the funding at the town level. The Department says it is satisfied that the Town Deal Boards are well constituted and claims they are working well. It is vital that the Boards continue to fully engage local stakeholders and consult with residents as towns develop bids. Recommendation: In its Treasury Minute response, the Department should set out how it will oversee Town Boards, and how it will ensure that all relevant local and regional bodies, and local residents, are involved in planning and implementing Town Deals.

It is still unclear what impact the Department is expecting from the Towns Fund, or when, and how the Department will measure its success. Although the Department is positive about the quality of the 13 plans submitted by the first cohort of towns and describes how it is assessing plans against local need, it has yet to develop monitoring and evaluation processes or decide how it will measure the impact and success of the Towns Fund. The Department says that its monitoring regime will measure outcomes that gauge improvement in the health and vitality of towns. It also tells us that outcomes will depend on the nature of each project and set out a list of possible measures which included jobs created, footfall, qualification levels, levels of private investment and commuting times. However, taking job creation as an example, we are not convinced that the Department has thought through how it will define and measure job creation to ensure that the Towns Fund will result in additional, good quality, sustainable jobs. Recommendation: In its Treasury Minute response, the Department should set out how the Towns Fund programme will secure positive, long term outcomes, and the measures of success it intends to use to monitor and evaluate its impact. In particular it should be clear about the measures against which it will measure any new jobs created.

We are concerned that towns may not have the capacity to deliver their plans and spend the money well. The Department says that the towns most in need of investment would have been disadvantaged in a competitive bidding process because of a lack of leadership, resources or experience of dealing with government departments. The Department made £14 million available to towns to help them to develop their investment plans. The Department also made £8 million available for consultancy support to help towns with things like project management and valuing Selecting towns for the Towns Fund 7 real estate. While this funding may help towns to develop their plans, if these towns are indeed the ones least able to bid for funds then it must also raise concerns about their capacity to deliver their plans and spend the money well. The Department says that it is working at pace to agree the funding that will be available for the 13 towns in the first cohort but warns that it could take up to 12 months to agree business cases and issue final approvals before projects can begin. The Department has profiled the funding over the next four financial years but does not know yet whether the profile it has developed aligns with towns’ individual investment plans. Recommendation: From the end of March 2021, the Department should write to the Committee with annual updates to provide assurance that it is spending the money well. The Department’s updates should demonstrate that its due diligence processes have included an assessment of towns’ capacity to successfully deliver their plans.

It is not clear how the Towns Fund fits with other government funding programmes with overlapping aims. The Department confirms that, despite the impact of Covid-19 on government spending plans, the £3.6 billion funding allocated to the Towns Fund is secure. It has no plans to do anything other than continue with the Towns Fund and to deliver the fund in a way that maximises the long-term economic growth and productivity of the towns. The Department also confirms that many of the bids are aligned with other funds, both from central and local government, and highlights the importance of aligning the Towns Fund projects with other interventions. But the specific aims of the Towns Fund and how it fits with other, similar programmes of government funding such as the Future High Streets Fund are unclear. Recommendation: The Government should use the opportunity provided by the Spending Review to be clear about the strategic fit of the Towns Fund programme with other funding programmes across government.

The impact of Covid-19 is likely to mean that some towns’ plans for how best to spend the money will need to be revisited. We are very concerned about the short-term and long-term effects of Covid-19 on towns, and high streets in particular. The Department tells us that its guidance steers towns to think carefully about investments that increase retail space in towns, given that Covid-19 may have accelerated some of the challenges for the high street. We are also concerned that Covid-19 will reduce towns ability to raise match funding for its plans. The Department says that it will help towns to meet the challenges of Covid-19 by giving towns with exceptionally good and well-evidenced plans more than £25 million, the original maximum funding limit, and that towns that have been more adversely affected by Covid-19 may have a greater likelihood of securing funding. It also plans to bring forward £80 million of the Towns Fund with each town receiving between £500,000 and £1 million. We remain concerned though that as the pandemic continues to affect towns, some will find that their plans need to change to respond to new challenges, and the Department needs to be alive to this. Recommendation: In its Treasury Minute response, the Department should set out how it is responding to the ongoing impact of Covid-19 on towns and their ability to implement their proposals for spending the funding and on the timeline for releasing funding. 8 Selecting towns for the Towns Fund 1 The selection process

On the basis of a report by the Comptroller and Auditor General, we took evidence from the Ministry of Housing, Communities and Local Government (the Department) about the Towns Fund.1

The Department’s lack of transparency fuelled accusations of political bias in the selection process.16 Furthermore, the Department’s statements to the press, issued after the National Audit Office’s report was published, referred to the report concluding that the selection process had been ‘robust’, whereas the report makes no such statement—which is a clear misrepresentation of the National Audit Office’s report. The Department’s Permanent Secretary said he did not have knowledge of these press statements.17 9 Q 36 10 Qq 35, 40, 102 11 Q 40 12 Qq 40–41 13 Qq 41–45 14 Qq 38–39, 103 15 Q 103; C&AG’s Report, paras 1.5–1.6 16 Qq 41, 52, 102 17 Qq 105–108; and, for example, Financial Times 21 July 2020 10 Selecting towns for the Towns Fund

Other examples of lack of clarity around the Towns Fund process are also of concern to us. The Department gave a confusing explanation for how and why the risks from a no- deal Brexit were assessed by Ministers, when already included in Departmental officials’ assessment. The Department agreed to write to the Committee on how Bank of England data were used to assess towns’ exposure to Brexit.18 Furthermore, the Department has yet to decide which towns across England will be eligible for the upcoming competitive round, or when and how it will be conducted.19 The Department told us it wants to complete its assessment of the first cohort of bids before planning the competitive round, and it hopes to have completed that assessment by the end of October.20 Engagement with local and regional representatives

We heard from the Department that its officials had assessed each town against three qualitative criteria using the knowledge of its area-based teams, rather than consulting directly with local stakeholders. The Department argued that it gave more weight to the quantitative criteria in its assessment, and that its area-based teams have a lot of contact, engagement and dialogue with local areas, which means that their views are informed.21 Similarly, we heard that Ministers relied on the Department’s area-based teams rather than consult with local stakeholders, including Local Enterprise Partnerships and local MPs.22 Of particular concern is that directly elected mayors were not consulted, despite officials specifically recommending to Ministers that they do so.23 Ministers explicitly rejected the recommendation, deciding they wanted to make decisions themselves without seeking local views.24 The Department clarified that Ministers speak regularly with mayors but that dedicated engagement on the Towns Fund did not take place.25

We queried why the Department had required a new tier of governance—Town Deal Boards—to be set up, rather than use existing governance structures to plan and implement the Towns Fund at the local level. The Department explained that existing structures, such as mayoral combined authorities and Local Enterprise Partnerships, were not appropriate for overseeing support and interventions for individual towns. It said that government’s original rationale for the Towns Fund was to recognise and respond to issues at the town level, as place-based policies had previously been too focused on cities and resulted in towns being overlooked.26

The Department told us that it is satisfied that the Town Deal Boards are well constituted, meeting departmental stipulations, and coming together well. Boards are involving the private sector and the wider social sector, with examples of some Boards being chaired by private sector business people and others by chairs of charities. The Department expressed confidence that through the Boards the right local coalitions were being developed to put together successful bids and deliver on their plans.27 We heard how some towns are consulting with residents as they develop bids, for example 18 Qq 04–101 19 Qq 29–30, 32, 46–47, 58–59 20 Qq 31, 59 21 Qq 36, 50, 82–84 22 Qq 82–84 23 Qq 49–55 24 Qq 54–55 25 Qq 98–100 26 Q 91 27 Q 61 Selecting towns for the Towns Fund 11 Blackpool, which invited comments from residents on draft versions of its plan through the council’s website.28 We reiterate the vital importance of Boards fully engaging with local stakeholders and consulting with residents as towns develop bids—ensuring this happens will be a key role for the Department’s observers on the Boards.29 28 Q 62 29 Q 85 12 Selecting towns for the Towns Fund 2 Making a success of the Towns Fund Monitoring and evaluating impact

The Department told us that it had not completed its analysis of the 13 plans submitted by the first cohort of towns but its early impressions of the quality of the plans and the range of interventions proposed were positive.30 It described how it was assessing town investment plans against local need, including the extent to which the plans show that towns have started to put together the partnerships they will need to deliver their plans successfully.31

Given our concerns in the past about the Department’s failure to put in place quantifiable objectives to help it measure the impact of its interventions on local economic growth, we asked the Department how it intended to approach this for the Towns Fund, to properly measure impacts such as job creation and improved wellbeing.32 The Department explained that it hopes its monitoring regime will measure outcomes that gauge improvement in the health and vitality of towns.33 The Department expects outcomes to depend on the nature of each project, but it wants to be able to look at a basket of measures at three different levels: the project level, the town investment plan level, and the overall programme level. It outlined how it plans to monitor the impacts of the Towns Deals on employment, income and wellbeing against the baseline of what is happening in those towns and, in due course, compare the performance of towns that have benefitted from the Towns Fund with other, similar towns.34

The Department told us that it is looking to probe each project to gauge how convinced it is that towns can deliver their plans successfully, and that it will build in robust monitoring and evaluation processes from the start, agreeing key outputs and outcomes such as jobs created and footfall before projects begin, and tracking them every six months.35 It has developed a prospectus and guidance which sets out a list of possible measures including jobs created, footfall, qualification levels, levels of private investment and commuting times.36 The Department told us that it wants the measures, when chosen, to mean something to local people. As an example, it cited how it is considering how it can reflect and measure sustainable, rather than short-term, employment.37 But we remain concerned that the Department could only set out to us in general terms how it might monitor and evaluate the impact of the Towns Fund; the detailed measures are still to be developed. Capacity to deliver and spend the money well

The Department’s rationale for opting for “a deals-based approach” to funding, rather than a competitive bidding process, was because towns most in need of investment would have been disadvantaged in a competitive bidding process due to a lack of leadership, resources or experience of dealing with government departments. The Department 30 Qq 60, 72–73 31 Q 60 32 Qq 85–86 33 Q 88 34 Qq 85–86 35 Qq 60, 85 36 Q 85 37 Q 88 Selecting towns for the Towns Fund 13 explained that a deals-based approach to selection enabled it to provide advice and support to help towns develop their bid and build capacity.38 With this in mind, the Department allocated around £14 million of “capacity funding” to towns that are eligible for the Towns Fund, to support them in developing their plans. The Department cited project management as an example of a common area where towns would need some help.39

The Department further told us that it had entered into a contract worth around £8 million with Arup, a professional services company, to provide towns with specific expertise in areas such as real estate valuation. The Department described the efficiency benefits it envisages in such an arrangement, whereby towns will access consultancy services centrally so that they do not have to look for that consultancy support separately.40

The Department told us that it is working at pace to agree the funding that will be available for the 13 towns in the first cohort and would like to be able to make decisions in October. But the Department did not want to guarantee it would meet that deadline and warned that it could take up to 12 months to agree business cases and issue final approvals before projects can begin.41 The Department told us that, while it would like to see as many projects as possible happen as quickly as possible, given the nature of construction projects and minor infrastructure works, if they are to happen robustly and safely, it would be some time before we see many projects on the ground.42

The Department has developed a funding profile for the Towns Fund over the next four financial years but does not know yet whether it aligns with towns’ individual investment plans. The Department explained that it wants the profile of funding over time to be led by what works in terms of project delivery and that, as part of its assessment process, it wants to properly understand the profile of the individual projects that towns have put forward.43 Once it has this understanding, it will consolidate it at programme level to see if the funding profile is appropriate. However, the Department explained that the availability of this information requires towns to draft individual business cases for each project and that it would probably be well into next year before it had detailed financial profiles across the individual towns, and then at programme level.44 Alignment with other funds

The £3.6 billion Towns Fund has three separate strands of funding comprising: • The 101 selected towns invited to develop Town Deals and bid for up to £25 million each, or up to £50 million in exceptional circumstances; • A competition for funding for those towns not in the initial selection of 101 towns; and • The Future High Streets Fund, to be distributed to towns and high streets across England through a competitive process.45 38 Q 34 39 Q 63 40 Q 63 41 Qq 76, 92 42 Q 92 43 Qq 79–80 44 Qq 80–81 45 C&AG’s Report, para 1.2 14 Selecting towns for the Towns Fund

The Department confirmed that, despite the impact of Covid-19 on government spending plans, the £3.6 billion funding allocated to the Towns Fund is secure. It told us that it had no plans to do anything other than continue with the Towns Fund and to deliver the fund in a way that maximises the long-term economic growth and productivity of the towns.46

We asked the Department whether, given the scale of change happening, it will bid for higher levels of funding to support the Future High Streets Fund. It explained that, as many of the towns that are eligible for Future High Streets funding are also eligible for Towns Fund funding, it will probably want to take a view on the Towns Fund as a whole and these two elements of it before deciding what the right level of future funding would be.47

The Department told us that many of the bids are aligned with other funds, both from central and local government, and highlighted the importance of aligning the Towns Fund projects with other interventions.48 But the specific aims of the Towns Fund and how it fits with other, similar programmes of government funding remain unclear. The impact of Covid-19

A consistent theme highlighted in the town plans that the Department has seen so far is the impact of Covid-19, leading towns to think about a more diverse range of uses for the high street. The Department told us that its guidance steers towns to think carefully about investments that increase retail space in towns, given that Covid-19 may have accelerated some of the challenges for the high street. The Department shared with us some example projects such as Darlington’s plan to expand the provision of T-levels and build a new centre to teach T-levels in town, and the repurposing of retail space as a library in Margate.49

How the impact of Covid-19 will influence decisions about how the Department allocates the Towns Fund is unclear. Whether towns that have been adversely affected by Covid-19 will have a greater likelihood of selection, or whether events may mean that some of the plans set out in winning bids are now less of a priority, is still to be determined. The Department told us that it will help towns to meet the challenges of Covid-19 by giving towns with exceptionally good and well-evidenced plans more than £25 million, the original maximum funding limit, and that towns that have been more adversely affected by Covid-19 may have a greater likelihood of securing funding.50

The Department explained that because of Covid-19 and the recent demands that have been placed on local government, the private sector and other members of the Town Deal Boards, it has left towns and the Town Deal Boards to determine which wave of funding they wanted to work towards.51 While the Department wants to maximise private sector co-investment, the impact of Covid-19 may reduce the ability of towns to secure match funding from other sources.52 46 Qq 33, 57 47 Q 28 48 Qq 74, 91 49 Q 67 50 Qq 68–70 51 Q 77 52 Q 74 Selecting towns for the Towns Fund 15

The Department has brought forward £80 million of the Towns Fund, with each eligible town receiving between £500,000 and £1 million for projects that will make a difference to the area, such as new green spaces, the creation of pop-up businesses spaces, pedestrianisation of streets to encourage walking or cycling, and creating new community hubs to support those living alone.53 The Department told us that towns have told it what kind of immediate measures they may be able to take in this financial year, and the brought-forward funding will support them in this.54 53 Qq 27, 75; Ministry of Housing, Communities & Local Government, Press release, 25 September 2020 54 Q 27 16 Selecting towns for the Towns Fund