Recommendation 3

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.