Public Accounts Committee “not convinced by rationale” for Towns Fund selections in process that was opaque and “not impartial”

The £3.6 billion Towns Fund was introduced at pace by the Ministry of Housing, Communities and Local Government (MHCLG) in summer 2019. Ministers selected towns to receive funding from a ranked list prepared by officials.

MHCLG claims it had good reasons for this approach, but in a report published today, Wednesday 11 November 2020, the Public Accounts Committee says it is “not convinced by the rationales for selecting some towns and not others”, finding the justification offered by ministers for selecting individual towns to be “vague and based on sweeping assumptions” and raising concerns over the decisions being politically motivated.

In some cases, towns were chosen by ministers despite being identified by officials as the very lowest priority - for example, one town selected ranked 536^th out of 541 towns.

MHCLG has also not been open about the process it followed and would not disclose the reasoning for selecting or excluding towns. This lack of transparency has fuelled accusations of political bias in the selection process, and is a risk to the Civil Service’s reputation for integrity and impartiality.

Although the Department’s Permanent Secretary confirmed he was satisfied the selection process met the requirements of propriety and regularity, a summary of the Accounting Officer assessment provided to the Committee - which sets out compliance with the legal framework for managing public money - remains unpublished, and the Committee is asking to be provided with the full version of the assessment.

MHCLG says that it wanted to give money to towns which it deemed unlikely to have the expertise to succeed at bidding for funding through an open competition; which also raises concerns about whether those towns will have the capacity to spend the money well. 

The impact of Covid-19 means that some towns will likely need to reconsider how best to spend the money, and that financially stretched towns will find it even harder to come up with match funding.

It is still far from clear what impact MHCLG expects from the Towns Fund, when it expects to see the benefits, and how it will measure success both at the town level and across the whole programme. With much remaining unclear about how the programme will be delivered or how MHCLG will oversee progress, the Committee will keep a watching brief on the scheme and expects regular updates to hold Government to account for how it has used taxpayers’ money in the Towns Fund.

Meg Hillier MP, Chair of the Committee, said: “In our programme of work on the Government response to the Covid pandemic, we have begun to see the grim, potentially huge costs of public spending made in haste and without all the usual, legal checks and controls. That makes it all the less acceptable to now be looking at billions of pounds handed out in an opaque process that has every appearance of having been politically motivated - long before Covid struck.

“Now, when every penny counts, and when some towns that won funding will almost certainly have to redirect it to fill the massive holes the pandemic has blown in their budgets, MHCLG must be open and transparent about the decisions it made to hand out those £billions of taxpayers’ money, and what it expects to deliver.”

1 The selection process was not impartial. Ministers chose most of the towns from a large group deemed eligible, based on assumptions around broad criteria. Although departmental officials scored and ranked all towns across England against a set of criteria, such as income deprivation, the selection process gave Ministers discretion to choose which individual towns would be eligible to bid. The Department believes pre-selecting towns to bid for money benefited towns that lacked the capacity and experience to put together competitive bids and would be disadvantaged by an open bidding process, and that ministerial selection enabled a better geographical spread of towns. Furthermore, it argues that the process included appropriate limits on ministerial discretion by restricting the selection to the half of towns in England with the highest levels of income deprivation, through all 40 of the high-priority towns being selected, and by requiring Ministers to record their rationales for selection of 12 low-priority and 49 medium-priority towns. However, the rationales given for the selection of towns from the medium-priority group are scant and appear based on sweeping assumptions. The Department’s Permanent Secretary confirmed that he was satisfied the selection process met the requirements of HM Treasury’s Managing public money, a summary of his Accounting Officer assessment remains unpublished.

Recommendation: Within one month of this report, the Department should share with the Committee the Accounting Officer assessment that gave assurance that the selection process met the requirements of Managing Public Money.

2 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.

1. 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.

1. 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.

1. 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 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.

1. 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.

1. 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./ENDS