MPs highlight "worrying lack of transparency" around Levelling Up funding and say last-minute rule changes disadvantaged councils

There has been a "worrying lack of transparency" in the approach to awarding Levelling Up funding, and some councils missed out after rules were changed for the funding "as it went along", the Public Accounts Committee has said.

In a report published today (15 February), the cross-party committee also claimed the Department for Levelling Up, Housing and Communities's (DLUHC) handling of the awards process "wasted scarce public resources" and caused some local authorities to lose out on funding.

It said: "The Department changed the rules for the Levelling Up Fund as it went along, for example only after submitting their bids for Round 2 of the Levelling Up Fund did local authorities learn that they had no chance of being successful if they had already secured Round 1 funding."

Additionally, only after Round 3 had launched did DLUHC decide that, rather than consider new bids, it would only allocate Round 3 funding to unsuccessful bids from round 2, meaning councils that had waited to submit bids for the third round missed out, the report said.

Responding to this criticism, DLUHC said this approach was the best way to remove significant effort from councils of bidding.

The committee recommended: "In future, the Department must give organisations applying for funds more assurance of the principles and implications for awarding funds under different scenarios and not change them once published, in order to save considerable time and money in preparing and submitting ineligible bids."

The report also raised concerns about cases in which funding had been awarded to supposedly "shovel-ready" projects that have yet to be implemented because of delays. 

According to the report, the delays have led to more than 80% of the Levelling Up Fund round 1 projects being set to miss their March 2024 completion deadline.

It also found 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.

It also noted that the DLUHC could not give the committee any "compelling examples" of what had been delivered so far.

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.

"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 added: "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."

Cllr Martin Tett, Chairman of the Local Government Association's People and Places Board, said: "As this report notes, the pandemic and inflation has led to increasing construction costs alongside wider supply and skills shortages.

"It is good that the Government has already provided greater flexibilities for councils on how they can spend their existing funding to take account of some of these delays.

"We need to realise the benefits of joined-up, multi-annual, long term funding and continue to move away from costly competitive bids between areas, so we can save money, drive up productivity and truly deliver levelling up as envisaged."

A DLUHC spokesperson said: “We’re proud that we've committed £15billion since 2019 to often overlooked areas, agreeing historic devolution deals, and shifting power and money out of Westminster. This money is regenerating town centres, creating new infrastructure and helping to level up communities across the UK.

“Buildings do not go up overnight and these are multi-year programmes, so it is to be expected that the capital spend ramps up in later years. But we will continue to give expert support to councils to tackle any delivery blockers so we deliver these vital projects quickly.”

The PAC's report comes a month after Durham Council, which was among the councils that complained about the Government's handling of the bids, decided to abandon a judicial review challenge it had threatened due to the cost of litigation.

The council had previously called on the Government to repay the £1.2m in costs of its five failed levelling-up bids after claiming the rules were changed without its knowledge.

Adam Carey