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Short-term wins on levelling up will only lead to long-term losses

Opaque distribution of funding is putting the government's flagship policy agenda at risk.

By Zoë Billingham

The government has put its own flagship levelling-up agenda at serious risk through the opaque distribution of levelling-up funding. Eyebrows have already been raised about the degree of discretion behind decisions on the Levelling Up Fund and the Towns Fund. But this week the public accounts committee (PAC) drew attention to how the first round of the Levelling Up Fund was distributed between places – with ministers only finalising the principles for awarding funding after learning the identities of shortlisted bids.

This opaque approach undermines trust in the government’s flagship political pledge, and it also fails to level up the country. Places are currently in a bind where competition is championed while the rules are rigged. There are plenty of examples of how to do it better.

The PAC is not the first body to highlight the degree of ministerial discretion over levelling-up funding. In 2020, the National Audit Office set out how officials knew there would be an inevitable degree of “qualitative judgement” in deciding which places secured a town deal. Its work showed that ministers were awarding deals with a large degree of discretion despite a clear ranking presented to them by officials and on criteria ministers had presumably agreed themselves. The PAC’s criticism of the distribution of the Levelling Up Fund this week was that the rules for selection for funding were finalised after it was made clear who would win.

But short-term political wins – enabling MPs to show their constituents they can secure funds for their area regardless of need – has an inevitable trade-off. While temporarily it could be electorally beneficial to demonstrate personal political clout, in the long term it will undermine the delivery of the very pledge the government was elected to deliver. To make a success of levelling up we need transparent, devolved and long-term commitments to places that need it most, particularly to encourage the coveted private sector investment described by the government’s own Levelling Up white paper.

There are a plethora of alternatives. At a bare minimum, the government could simply stick to published criteria agreed pre-competition and remove later discretion. Unfortunately, in last year’s funding prospectus there were four broad criteria for selection and five reasons stated for when ministers could exercise discretion. But the government could improve how its offer is distributed by devolving the levelling-up funding based on broad outcomes and need and then letting places decide for themselves how to use the funding to level up and to what timescales. This could be linked to regional differences in historical investment to counter underinvestment in places that need it most. The government could easily supplement this with specified, targeted funding for, say, transport connectivity, recognising its own priorities across places.

The distribution of levelling-up funding is by no means the only issue with the current approach. The small-scale and short timescales of funding on offer to address our deep-rooted regional inequalities are of serious concern alongside tight central control. The Levelling Up Fund, which is overseen by central government, is an investment of just £32 per person in the north. This compares to a £413 per person drop in the north in annual spending by councils over the past decade. Our analysis has also shown that the Shared Prosperity Fund, the replacement for EU regional funding, represents a 43 per cent cut to what places would have received through EU structural funds. But what the PAC’s report this week shows is that even what is on offer can’t be relied upon in the areas that so desperately need support.

The levelling-up agenda may have started as a neat way to capture the feeling of places and people that felt left behind across the country. But it is now the inequality people care most about. It should be transparent, devolved and significantly more substantial to meet the scale of our country’s regional inequality. The public need and want levelling up to be followed through – instead they’re getting shown the outcome of another rigged system.

Read more: Why levelling up the UK’s council homes has to involve the capital

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