Source · Select Committees · Public Accounts Committee
Recommendation 3
3
We are concerned that optimism bias has meant realistic bids to the Levelling Up Fund...
Recommendation
We are concerned that optimism bias has meant realistic bids to the Levelling Up Fund have missed out at the expense of ‘shovel-ready’ projects that have since been beset with delays. The Department told us that, four weeks from year end, it had paid out around £100 million of the “up to” £600 million it made available in 2021–22 for the first round of the Levelling Up Fund. Since deliverability was one of the criteria for the first round (£1.7 billion) and the Department required bidders to be able to spend some funding in the 2021–22 financial year (through a pass/fail gateway criteria), this figure should be higher. We are concerned that some bidders may have got through the selection process by being overoptimistic about how ‘shovel ready’ their projects were, while other—more realistic—bidders may have missed out. Local authorities unused to presenting bids in this way, such as those in the devolved administrations, may have been at a particular disadvantage. Recommendation: The Department should set out: • Spending profiles for the first round of funding, confirming how much have spent in 2021–22 against the £600 million it anticipated paying; and • Its assessment of optimism bias in authorities’ deliverability plans.
Government Response
Not Addressed
HM Government
Not Addressed
3.1 The government agrees with the Committee’s recommendation. Recommendation implemented 3.2 The Levelling Up Fund is a new funding programme, and the accountable departments – the Department for Levelling Up, Housing and Communities and Department for Transport (DfT) – understand it is important to have robust process in place. The £600 million referred to came from an early planning assumption on what the department expected to spend and was updated at Spending Review 2021 which saw £0.2 billion of spend agreed for 2021-22. 3.3 The Prospectus for the first round was clear that projects which are able to demonstrate investment or begin delivery on the ground in 2021-22 financial year would be prioritised. As such, bids were required to be able to defray some funding in 2021-22. To safeguard value for money and ensure deliverability, a robust assessment (as per the published framework) was carried out over the summer following the receipt of applications in June 2021. Deliverability formed 25% of the assessment framework, and each bid was reviewed by trained assessors to identify the best quality and most deliverable projects. 3.4 Following the autumn 2021 Spending Review announcement, the accountable departments have worked with successful applicants to ensure that the necessary baselining was conducted and that places were prepared for delivery. Following this assessment and careful due diligence, funding agreements were issued in February with payments made after. 3.5 This robust process gives the government confidence in the overall deliverability of funded proposals. Nevertheless, the accountable departments did pay out less funding in 2021-22 (£128 million including RDEL) relative to the updated SR figure of £200 million). This reflects the economic climate which continues to shift, with many factors constraining speed of delivery, including contracting issues due to cost inflation, supply chain disruption and fear of recession. Table 1: Table showing spend for 2021-22 and the current profile of expected spend for LUF Round 1 2021-22 2022-23 2023-24 2024-25 2025-26 (£m) (£m) (£m) (£m) (£m) CDEL 108 449 889 220 27 RDEL 20 Total 128 449 889 220 27