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Government funding failures delay levelling-up projects

Author: ICAEW Insights

Published: 12 Dec 2023

The National Audit Office has criticised the government for failing to deliver levelling-up funds on time.

The UK government’s levelling-up plans are behind schedule, leaving local authorities unable to complete projects by the original deadlines, according to a critical report by the National Audit Office (NAO).

The NAO attributed the delays to a poor understanding by central government of what had worked in previous local growth programmes, the need to scale up its management of grant-making, and slowness to agree funding across Towns Fund and Levelling Up Fund projects. Inflationary pressures, skills shortages and wider construction industry supply challenges have all contributed to the difficulties facing local authorities in delivering agreed levelling-up projects. 

The independent public spending watchdog said that departmental decisions have had a “detrimental impact.” It says poor communication on the results of bids by local authorities, as well as a mismatch between submission deadlines for the first round of Levelling Up Fund bids and the final confirmation of Town Deals offers have prevented “effective planning and potentially jeopardising value for money” by local authorities.

According to the report, the Department for Levelling Up, Housing and Communities (DLUHC) has allocated £9.5bn of funding for local government through three significant funds to support more than 4,300 projects across the UK. The NAO found that 50% of the main construction contracts for Levelling Up Fund projects due by March 2024 were unsigned, rising to 85% for construction contracts due by March 2025.

“Given the delays and delivery risks, DLUHC’s original deadlines are unlikely to be met,” the NAO warns. It found project delivery under Levelling Up and Towns Funds is behind schedule, and local authority progress reports are identifying signs of slippage. 

As a result, DLUHC has had to move some of the original deadlines. As at the end of March 2023, it has distributed £2bn to local places, and those places have spent £0.9bn so far across all three funds, according to the NAO report.

Alison Ring OBE, ICAEW Director of Public Sector and Taxation, said: “The National Audit Office has highlighted yet again how micromanagement by central government is not delivering the best outcomes for taxpayers. 

“The whole process of making local authorities bid repeatedly for funding means that both local and central government waste time and effort on the bidding process, as well as – almost inevitably – resulting in delays to the delivery of projects critical to a key government objective.”

The NAO’s report, Levelling up funding to local government, considered the DLUHC work supporting local projects across the country through the UK-wide Levelling Up Fund, worth £4.8bn; the UK Shared Prosperity Fund (that replaced EU regional development funds), worth £2.6bn; and the England-only Towns Fund, worth £3.2bn – a total of £10.6bn planned to be spent between 2020/21 and 2025/26.

The three funds have overlapping investment themes around regeneration, culture and transport – but DLUHC has allocated funding in different ways, meaning local authorities have not been able to align their plans to secure the best value for taxpayers. 

Despite the delays, the NAO said the department has improved its oversight and evaluation processes and DLUHC “has taken steps to understand local authorities’ delivery challenges and is piloting a more flexible approach to move money between Towns Fund and Levelling Up Fund projects”.

Gareth Davies, head of NAO, said: “DLUHC is in a better position to understand the benefits these funds deliver following significant improvements in its approach to evaluation. But the department and local authorities will need to work together to unblock projects that are delayed or have not started and set realistic expectations for delivery.

“It is important that DLUHC shares the insights from its evaluation work with local decision-makers to help them achieve better value for money and reduce regional inequalities by improving the places people live.”

Ring said: “While it is good to know that the Department for Levelling Up, Housing and Communities is now starting to get the hang of the process it has established, there are still some big questions about whether this process should exist in the first place.”

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