Levelling Up: No compelling examples of delivery so far as delays hold back spending, say MPs

Just over 10% of promised funds actually spent and making a difference on the ground

PAC warns of lack of transparency and waste of public resources in funding approach

The Government is unable to provide any compelling examples of what Levelling Up funding has delivered so far. In a report published today, the Public Accounts Committee (PAC) warns thatcouncils have been able to spend just a fraction of the Government’s promised Levelling Up funding, with only just over 10% of the funds provided to reduce inequality under the Levelling Up agenda actually spent and making a difference on the ground.

The PAC’s report finds that, of £10.47bn in total funding from central government, which must be spent between 2020-21 and 2025-26, local authorities have been able to spend only £1.24bn from the Government’s three funds as of Sept 2023. Furthermore, only £3.7bn had been given to local authorities out of the total allocation by the Department for Levelling Up, Housing and Communities (DLUHC) by December 2023.

In evidence to the PAC, DLUHC cited project-specific issues and the impact of the pandemic and inflation for a lower-than-anticipated level of spending to date. The PAC is calling for six-monthly updates from DLUHC, both on the amount of money released to and spent by councils, and on the progress of projects themselves.

The report finds that more impactful bids to funding lost out due to optimism bias in favour of so-called ‘shovel-ready’ projects. Yet, the report raises concerns that not enough was done by DLUHC to understand the readiness of schemes and the challenges facing local authorities before funds were awarded. This also means that DLUHC has had to extend the deadline for successful bidders for earlier funds to spend their money. Round 1 of Levelling Up Funding was awarded to ‘shovel-ready’ projects that were supposed to be completed and delivering for local people by March 2024 – but 60 out of 71 of these projects have had to extend to 2024-25, with further delays in other schemes likely.

The PAC’s inquiry also found a worrying lack of transparency in DLUHC’s approach to awarding funds, with rules for accessing funding changing while bids were still being assessed, which was also not communicated in advance to councils. 55 local authorities therefore bid under changed rules with no chance of being successful in Round 2, with an average bid for grants like Levelling Up costing around £30k. This approach wasted scarce public resources, and the report calls on DLUHC to set out the principles it will apply and the decision-making process for awarding future Levelling Up funds.

Dame Meg Hillier MP, Chair of the Committee, said: “The levels of delay that our report finds in one of Government’s flagship policy platforms is absolutely astonishing. The vast majority of Levelling Up projects that were successful in early rounds of funding are now being delivered late, with further delays likely baked in. 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. We are further concerned, and surprised given the generational ambition of this agenda, that there appears to be no plan to evaluate success in the long-term.

“Our Committee is here to scrutinise value for money in the delivery of Government policy. But in the case of Levelling Up, our report finds that 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. We will now be seeking to keep a close eye on DLUHC’s progress in unclogging the funding system. Citizens deserve to begin to see the results of delivery on the ground.”

PAC report conclusions and recommendations  

1. Local authorities have been able to spend only £1.24 billion, just over 10%, of the promised £10.47 billion from the government’s three Levelling Up funds (as of September 2023). Furthermore, By December 2023, the Department had given £3.70 billion to local authorities out of the total allocation. The Department knows that many projects are struggling so it has provided flexibility to local authorities to extend the deadlines to complete projects under the Levelling Up Fund Rounds 1 and 2 and the Future High Streets Fund. The Department told us that in December 2023 it had written to all Levelling Up Fund Round 1 and 2 projects asking for a status update, as well as to Future High Streets Fund projects where it had concerns the projects may be at risk of missing the programme deadline of September 2024. We are concerned these extensions are masking problems and backloading expenditure. The National Audit Office (NAO) reported the majority of projects were ‘underway’. But the Department confirmed that this does not necessarily mean construction work has started on site. We were also concerned to hear that out of the 185 projects that had commenced under the Future High Streets Fund, 19 (just over 10%) had been paused and so risk not being completed at all/on time.

Recommendation 1: In its Treasury Minute response, and then by letter once every three months to this Committee, the Department should set out:

• the latest position on the amount of money that has been released to and spent by local authorities across the three funds; and
• provide an update on the progress of projects broken down by fund and project status.

2. We are concerned the Department did not do enough to understand the readiness of project proposals and the challenges facing local authorities before it awarded funds. As we have found before, optimism bias has put impactful bids to the Levelling Up Fund at risk of missing out at the expense of so-called ‘shovel-ready’ projects. The Department gave many reasons why projects are delayed and how it needed to balance deliverability against requiring local authorities to have everything in place to start building as soon as they are awarded funds. But this optimism has meant the Department has had to allow local authorities to extend the deadline to spend their money for all projects in the Levelling Up Fund Rounds 1 and 2 and the Future High Streets Fund. So far, the vast majority (60 out of the 71) of Levelling Up Fund Round 1 projects which were due to have spent their government funds by the end of 2023-24 have reprofiled their spend into 2024-25 and the Department expects some of the remining 11 to do so as well. We found this astonishing given Round 1 of the Levelling Up Fund was awarded to ‘shovel-ready’ projects that were supposed to be completed and delivering for local people by March 2024. As Round 3 of the Levelling Up Fund has been allocated to those unsuccessful bids made under Round 2, the Department could not assure us these same delays would not be repeated. Furthermore, the Department could have been much more inquisitive about the realistic delivery timetable of each project it funded, for example in regard to obtaining planning permission and acquisition.

Recommendation 2: In its Treasury Minute response, the Department should set out what it has learnt to ensure proposals have the best chance of timely success, and how it will ensure this learning is applied to future funds. It should also set out how it is sharing its experiences with the Levelling Up programme both within the Department and across government to reduce the risk of similar mistakes being repeated in other programmes and projects.

3. The Department changed the rules for applying for the Levelling Up Fund during the application process, wasting scarce public resources, disadvantaging some local authorities and hindering transparency. The Levelling Up programme was sub-optimal in this respect and it is important that lessons are learnt. There is a worrying lack of transparency in the Department’s approach to awarding funds with the Department changing the rules for the Levelling Up Fund as it went along. Having seen how many bids were submitted, the Department decided that local authorities that were successful in Round 1 would not be awarded any funds in Round 2. On average, local authorities have historically spent £30,000 pursuing each competitive grant, such as Levelling Up grants, yet we now know that 55 local authorities who had received funding in Round 1 and then bid in Round 2 had no chance of being successful in Round 2. The Department also changed the rules for Round 3, deciding it would not run a new competition but instead restrict the allocation of Round 3 funding to unsuccessful Round 2 bids, meaning those waiting to bid in Round 3 missed out. The Department said that, on balance, this was the best approach to remove the significant effort of bidding. But the downside is that local authorities that did not bid under Round 2 (for example, because they were not ready) did not get a chance to fund their projects. In addition, only around 25% of bids across Rounds 1 and 2 of the Levelling Up Fund were successful: the Department should have better anticipated the expected demand for funding and, given the available funding, set sufficiently stringent criteria to help avoid local authorities investing in bids that had little chance of success.

Recommendation 3: In its Treasury Minute response the Department should set out the principles it will apply and the decision-making process for awarding future Levelling Up  funds for reducing regional inequality.

The Department should carefully construct the criteria for all funding programmes before launching them – setting out any flexibilities and possible alternative options (and the circumstances in which these would be triggered) at the outset – and must not change the rules once they are published barring exceptional circumstances. We would trust that the rest of government also heeds this advice.   

4. We welcome the intentions to simplify the funding system, but the Department has more to do to implement its plans. The Department published its plans for funding simplification in Summer 2023. This plan covers the whole of government and aims to simplify the approach to, and number of, funding streams available to local authorities. The plan includes, giving local authorities more flexibility in managing their projects and reducing the burden of data collection on local authorities. Currently, the Department collects over 400 indicators across 13 funds but recognises this is too much. It has established what it calls ‘pathfinder simplification pilots’ that allow ten local authorities who are receiving money from multiple funds to pool these funds so they can manage their individual projects as one. However, it is yet to draw any conclusions from this initiative.  

Recommendation 4: In its Treasury Minute response, the Department should update us on the progress with simplification including its work with other government departments and progress with the ten simplification pilots. In the future, it should update the Committee by letter once every six months of further developments in this regard, along with the costs and benefits (both to the Department and local authorities) arising from greater simplification.

5. The Department is providing focused support to some local authorities with project delivery, but it remains to be seen how the Department will use any learning from these activities to support all local authorities. In addition to the flexibilities introduced in the pathfinder simplification pilots (see above), the Department is providing focused support to local authorities to help them unblock and deliver their projects. This includes area teams that work with local authorities and departmental experts that it is deploying into 25 local authorities to help them unblock delivery. The Department also has an additional £65 million to provide additional funding to local authorities who received funds under the Levelling Up Fund and to provide external experts to build capacity and capability in local authorities. But the Department’s focused support is available to only a small number of local authorities. It remains to be seen how the Department is going to disseminate these lessons to support all local authorities and how they will use these lessons to improve their approach in the future.

Recommendation 5: The Department should set out in its Treasury Minute response the lessons it is learning from its local support work and how it will disseminate the lessons to all local authorities.

6. We recognise the Department's plans to evaluate these funds in the short-term, but we are concerned it has no long-term plans to measure the impacts. The Department is playing catch up in its efforts to carry out robust evaluation. Having previously not considered evaluation well enough, it is now putting in place plans to carry out evaluation of the funds. Evaluating the impact and added value of levelling-up funds will be complex and will require a wider range of information than that used to award funds in the first place. It may be challenging to show clearly what outcomes can be convincingly attributed to the funding awarded. The Department expects findings from the evaluations to start becoming available from 2025. We are however concerned about how the Department will ensure robust data over the long-term and surprised that the Department has no long-term plans to know if these funds worked, for example, by reviewing over five, ten, and 15 years to find out how people have benefitted from the investments.

Recommendation 6: In its Treasury Minute response, the Department should:

• update us on its progress with evaluation and provide us with regular updates thereafter; and
• update us on how it will ensure it has the right data and how it will carry out evaluation over the long-term to assess whether the investments have led to sustained improvement.