27 January 2023

Where has the levelling-up fund money been distributed?

As the second tranche of successful bids are announced, we look at where investment has headed so far.

Blackpool is ranked as the most deprived local authority in the UK, but its Levelling Up Fund bids have been unsuccessful. Photo by Getty/Christopher Furlong.

This week the government announced the second tranche of the £4.8bn levelling-up fund to much fanfare, with £2.1bn awarded to more than 100 projects across the UK.

There were concerns about how the funding was distributed – with Yorkshire and the Humber receiving a third less than it did in the first tranche, or London receiving more than double – and analysis of data by the IPPR North think tank from the first tranche of the levelling-up fund published in November by the Department for Levelling Up, Housing and Communities does little to dispel these concerns.

It shows that in the north-west, the most and third-most deprived authorities in England – Blackpool and Knowsley – were unsuccessful. The second-most deprived authority, Manchester, was also unsuccessful with one bid, though it secured funding for another. Meanwhile the fifth-most deprived authority in England – Barking and Dagenham, which is also the most deprived London authority – was unsuccessful on two occasions, despite more affluent authorities securing funding.

In the south-west, the two most deprived applicants – Torbay and Torridge – were also unsuccessful. The same happened in the north-east as Middlesbrough was unsuccessful too. And in the west Midlands, the most affluent authority to apply for the levelling-up fund – Bromsgrove, Sajid Javid’s constituency – was successful while more deprived authorities such as Coventry lost out.

The east Midlands secured the most funding – which was 10 per cent more than the north-east, the most deprived English region. The east Midlands was also the only region that received more than half of the funding it requested and the only region where at least half of applicants were successful. Robert Jenrick – who represents an east Midlands constituency – was one of the main secretaries of state responsible for decisions relating to the levelling-up fund at the time.

Though some of the authorities that missed out have since secured funding following this week’s announcement, the discretion the secretary of state has over the “geographic spread within and between regions”, the opaque nature of decision-making, and the inability to explain why deprived authorities are rejected in favour of their more affluent counterparts poses questions about the integrity of the government’s levelling-up fund.

Our analysis, at the IPPR, of the first tranche also shows that successful applicants in the north-east and south-west were on average more affluent than unsuccessful applicants, which poses questions about the unequal distribution of funding across regions as much as within them.

[See also: Where next for levelling up?]

The government has not yet published information on the identity of the unsuccessful bids, or their geography of how much funding was requested, so a similar analysis cannot be conducted of this week’s announcement.

The picture in the north is not dissimilar from elsewhere. UK-wide, 36 per cent of funding requested was received – equivalent to £1 in every £2.78.

What we do know about the second tranche is that only 21 per cent of the 525 submissions were approved, which is why there is huge disappointment in some quarters. This is an increasingly familiar pattern. Our analysis shows that the north of England only received 38 per cent of funding that it requested from the first tranche of the levelling-up fund: £520m of £1.36bn. Put another way, authorities received £1 for every £2.63 they asked for.

This can be read in two ways: the levelling-up fund is either oversubscribed or under-resourced. In any case, the result is the same and there are programmes that are ready to turbocharge growth that remain without funding.

The opaqueness of funding streams and the government’s inability to meet the scale of the challenge are two reasons why a credibility gap between its commitment to tackle regional inequality and the reality has emerged.

These issues are also compounded by the speed at which the funding the government has made available is being spent. By October of last year, only £243m of the levelling-up fund had been spent within its first 12 months – equivalent to 5 per cent. The government previously forecasted that £600m would be spent by April that year, before revising it down to £200m. Neither of those targets were met.

Current economic conditions have hamstrung delivery, with some local authorities citing inflation and the renegotiation of contracts as core issues undermining the viability of their projects. The scale of this challenge may recede given inflation is forecast to fall, but it will not disappear.

The government could have provided authorities with certainty, but it hasn’t. Nor has it explored the option of inflation-proofing successful applicants, despite the levelling-up fund now being worth hundreds of millions less than originally planned. The government’s solution has been to encourage local authorities to reduce their ambition or “reprofile” their investment, but this lack of imagination will result in poorer outcomes for communities.

If the Prime Minister remains committed to tackling regional inequalities, the government must close the gap between rhetoric and reality. In the first instance, it would require radically improving transparency ahead of the third tranche, expected to be open for bidding this summer, so that the decision-making process is better understood. The absence of clarity undermines public confidence in the legitimacy of the government’s mission and the ability of policymakers to scrutinise its progress. Improving transparency would be a first step in reassuring the public that the allocation of funding is impartial.