Committee Slams Government Waste In Levelling Up Distribution

16th March 2024

A lack of transparency over the distribution of levelling up funds has "wasted scarce public resources and caused some local authorities to miss out", according to an influential committee of MPs.

In a report published today, the cross-party Commons Public Accounts Committee (PAC) says that by September 2023, only about 10% of more than £10bn promised in levelling up funding had been spent - and that the government has not provided "any compelling examples" of what the high-profile policy has so far delivered.

The towns fund, the levelling up fund and the UK shared prosperity fund will together allocate £10.47bn to local areas, which must all be spent by March 2026.

But a recent PAC inquiry found that by December 2023, the government had given out only £3.7bn of this to councils. And as of September that year, they had been able to spend only £1.24bn.

The findings follow a report from the National Audit Office in November 2023 that said more than 100 levelling up projects had been delayed.

In its evidence, the Department for Levelling Up, Housing and Communities (DLUHC) said the lower than expected spending levels were down to issues with individual projects, together with the impact of the Covid pandemic and inflation.

But the committee's report said it was "astonishing" that the "vast majority" (60 out of the 71) of the levelling up fund's round one projects, which were due to have spent their government funds by the end of 2023-24, have reprofiled the spending into 2024-25.

The funding for this round was intended for "supposedly ‘shovel-ready'" projects, the report said. But "optimism bias" in favour of these has meant that "impactful bids to the levelling up fund may have missed out".

The PAC is asking for updates once every six months on the distribution and spending of money from the three funds, and on the progress of projects.

The committee also criticised DLUHC for a “worrying lack of transparency” in the distribution of funds, “changing the rules...as it went along”.

Following a large number of bids, the department decided that local authorities successful in round one would not be awarded round two funding. This meant that 55 second round applicants had no chance of success, despite their spending on the bid preparation - which is typically about £30,000.

DLUHC also decided to restrict its awards of round three funding to unsuccessful round two bids, meaning councils waiting to bid in the third round missed out.

The report says DLUHC “should have better anticipated the expected demand for funding and...set sufficiently stringent criteria to help avoid local authorities investing in bids that had little chance of success”.

According to the report, the committee was told by South East Councils that the bidding process for the funds examined had led to a “begging bowl culture” which proritised the “ever-changing demands of ministers” over effective long-term planning.

The PAC says it welcomes DLUHC's intentions to simplify the funding system for councils, but says it has “more to do to implement its plans”.

The committee's chair Dame Meg Hillier (Lab), commented that "DLUHC appears to have been blinded by optimism in funding projects that were clearly anything but ‘shovel-ready', at the expense of projects that could have made a real difference".

She said that while the committee scrutinised value for money, in the case of levelling up "the Government is struggling to even get the money out of the door to begin with. Government has not helped the situation by changing the rules for funding mid-process, wasting time and money and hindering transparency.”

Martin Tett (Con), chair of the Local Government Association's People and Places Board, said it was positive that the government had provided "greater flexibilities for councils" on how they can spend their existing funding to account for delays due to factors such as the pandemic and inflation.

Cllr Tett added: “We need to realise the benefits of joined-up, multi-annual, long term funding and continue to move away from costly competitive bids.”

Author - Jonathan Knott
https://www.lgcplus.com/finance/committee-slams-government-waste-in-levelling-up-distribution-15-03-2024/

12 December 2023
The National Audit Office has criticised the government for failing to deliver levelling-up funds on time.
The UK government’s levelling-up plans are behind schedule, leaving local authorities unable to complete projects by the original deadlines, according to a critical report by the National Audit Office (NAO).

The NAO attributed the delays to a poor understanding by central government of what had worked in previous local growth programmes, the need to scale up its management of grant-making, and slowness to agree funding across Towns Fund and Levelling Up Fund projects. Inflationary pressures, skills shortages and wider construction industry supply challenges have all contributed to the difficulties facing local authorities in delivering agreed levelling-up projects.

The independent public spending watchdog said that departmental decisions have had a “detrimental impact.” It says poor communication on the results of bids by local authorities, as well as a mismatch between submission deadlines for the first round of Levelling Up Fund bids and the final confirmation of Town Deals offers have prevented “effective planning and potentially jeopardising value for money” by local authorities.

According to the report, the Department for Levelling Up, Housing and Communities (DLUHC) has allocated £9.5bn of funding for local government through three significant funds to support more than 4,300 projects across the UK. The NAO found that 50% of the main construction contracts for Levelling Up Fund projects due by March 2024 were unsigned, rising to 85% for construction contracts due by March 2025.

“Given the delays and delivery risks, DLUHC’s original deadlines are unlikely to be met,” the NAO warns. It found project delivery under Levelling Up and Towns Funds is behind schedule, and local authority progress reports are identifying signs of slippage.

As a result, DLUHC has had to move some of the original deadlines. As at the end of March 2023, it has distributed £2bn to local places, and those places have spent £0.9bn so far across all three funds, according to the NAO report.

Alison Ring OBE, ICAEW Director of Public Sector and Taxation, said: “The National Audit Office has highlighted yet again how micromanagement by central government is not delivering the best outcomes for taxpayers.

“The whole process of making local authorities bid repeatedly for funding means that both local and central government waste time and effort on the bidding process, as well as - almost inevitably - resulting in delays to the delivery of projects critical to a key government objective.”

The NAO’s report, Levelling up funding to local government, considered the DLUHC work supporting local projects across the country through the UK-wide Levelling Up Fund, worth £4.8bn; the UK Shared Prosperity Fund (that replaced EU regional development funds), worth £2.6bn; and the England-only Towns Fund, worth £3.2bn - a total of £10.6bn planned to be spent between 2020/21 and 2025/26.

The three funds have overlapping investment themes around regeneration, culture and transport – but DLUHC has allocated funding in different ways, meaning local authorities have not been able to align their plans to secure the best value for taxpayers.

Despite the delays, the NAO said the department has improved its oversight and evaluation processes and DLUHC “has taken steps to understand local authorities’ delivery challenges and is piloting a more flexible approach to move money between Towns Fund and Levelling Up Fund projects”.

Gareth Davies, head of NAO, said: “DLUHC is in a better position to understand the benefits these funds deliver following significant improvements in its approach to evaluation. But the department and local authorities will need to work together to unblock projects that are delayed or have not started and set realistic expectations for delivery.

“It is important that DLUHC shares the insights from its evaluation work with local decision-makers to help them achieve better value for money and reduce regional inequalities by improving the places people live.”

Ring said: “While it is good to know that the Department for Levelling Up, Housing and Communities is now starting to get the hang of the process it has established, there are still some big questions about whether this process should exist in the first place.”

From https://www.icaew.com/insights/viewpoints-on-the-news/2023/dec-2023/government-funding-failures-delay-levellingup-projects

NATIONAL AUDIT REPORT
https://www.nao.org.uk/wp-content/uploads/2023/11/levelling-up-funding-to-local-government.pdf