The UK Government’s levelling up policy is a failure, says cross-party report

The UK Government’s levelling up policy is failing Wales’ poorest communities as well as those in other parts of the UK, a cross-party committee of MPs has concluded.

In a damning report, the Levelling Up, Housing and Communities Select Committee said there was no prospect of the policy succeeding unless it was radically overhauled.

Publication of the report follows a series of evidence sessions at which politicians including Welsh Economy Minister Vaughan Gething testified.

The report states: “We have received a considerable amount of evidence from witnesses who claim that what they are due to receive differs from what they had been expecting. The Scottish Government said that their allocation for 2022-23 is £151m short.

“The Welsh Government said that for the three years from 2021-22 to 2024-25 they will receive £772m less than the equivalent allocation would have been under EU funds.In their written evidence, officials from the Northern Ireland Executive said that their UK Shared Prosperity Fund (UKSPF) allocation was £127m over three years, ‘representing a substantial shortfall in the total funding … and represents a loss of £23m per annum in Northern Ireland’.

“Despite this, in January 2023, the UK Government said that the UKSPF allocation is a sufficient replacement of the previous EU funding stream.”

Job losses

The report said Mr Gething had told the committee there were due to be 600 job losses as a result of the change in funding.

Despite assertions to the contrary, all the evidence received by the committee said the UKSPF was not a sufficient replacement. The report said: “The number of stakeholders and local government bodies which have told us the UKSPF is not a sufficient placement is significant.

“This view indicates that there has been a serious deficit of deliberation and calculation between DLUHC [the Department of Levelling Up, Housing and Communities] and recipients on this issue, resulting in the lack of a shared understanding of the methodology the government has used to calculate UKSPF.”

The report added: “The government’s flagship levelling up policy is a key local growth initiative which has the potential to transform the lives of people across the UK. However, the method of delivering funding, the allocation process and the extent to which different funds have been compatible with the needs of communities in the short and long term is creating several obstacles for the policy’s success.

“The dearth of data from the DLUHC is an area of serious concern. DLUHC has conceded that it does not have sufficient data in relation to Whitehall departmental expenditure on the full range of levelling up funds or on combined authority income or expenditure. We cannot understand how the DLUHC can make significant policy decisions either in relation to priority areas, funding allocations or the measurement of the success or failure of the levelling up policy in achieving its objectives, if there is not adequate data to support these tasks.”

Local authorities

The report also criticised the UK Government’s decision to seek competitive bids for funding from local authorities, saying this could not compensate for the loss of general local government funding since 2010 and concentrated on specific projects rather than councils’ own spending priorities.

The DLUHC had claimed it had consulted devolved administrations about how the policy would be delivered, but this was contradicted by the administrations themselves.

The report said: “We heard evidence questioning the DLUHC’s decision to move away from using the Index of Multiple Deprivation. [Barnsley council] criticised the ‘untested methodology’ the government used to determine priority areas in the first round [of funding]. The new dataset was collected by a private company based upon Freedom of Information requests and ‘lacked empirical data’.

“According to the Industrial Communities Alliance, this ‘ineptitude’ resulted in ‘bizarre outcomes’.”

The report quoted from a previous inquiry by the Commons’ Public Accounts Committee which stated in relation to the DLUHC: “The department has not been open about the process it followed and it did not disclose the reasoning for selecting or excluding towns to benefit from the Towns Fund. This lack of transparency has fuelled accusations of political bias in the selection process and has risked the Civil Service’s reputation for integrity and impartiality.”

The new report states: “This apparent lack of transparency leaves the DLUHC open to criticism about how decisions receive Ministerial sign-off. This has been highlighted by examples such as Richmondshire, North Yorkshire, the Prime Minister’s own constituency. Richmondshire District Council received £19m through round two of the Levelling Up Fund, when the area of Richmondshire is reported to be in the top quintile [fifth] of the most prosperous places in England, according to the average deprivation score.”

Challenging

The report concluded: “Ultimately, the government is right to prioritise levelling up policy, but this laudable aim is unlikely to be successful, given the government’s current approach to funding. Funding the implementation of a levelling up policy is complex and challenging, as this report suggests. However, DLUHC does not know which pots of money across government contribute towards levelling up, nor does DLUHC appear to have oversight over how these objectives can be delivered strategically through departmental coordination.

“As a result the government’s current approach is characterised by one-off short term initiatives, and this will be insufficient if the geographic, economic, social and health inequalities are to be reduced and ultimately overcome. To change this, the policy requires a long term substantive strategy and funding approach – things this policy currently lacks. Without such, levelling up risks joining the short term government growth initiatives which came before it.”

A Welsh Government spokesman said: “We welcome this report and share the committee’s serious concerns. The Levelling Up process has left Wales with less say over less money within a chaotic system that is failing to support the jobs, projects and services in the places that need them. The UK approach has also rolled back devolution by centralising all decisions in Whitehall.

“Wales is £1.1bn worse off as a result of the UK Government’s failure to meet its pledge to replace previous EU funds in full. The Welsh Government previously used these funds to help tackle unemployment, deliver apprenticeships, invest in new industries and build new schools among other investments. Universities were also supported in a system that provided certainty for those pioneering the creation of skilled, quality employment. Under the UK Levelling Up regime, more than 1,000 high quality jobs in research and innovation are being lost in Wales as universities cannot access these funds.

“The UK Government should stop taking decisions in devolved areas and restore these funds to Wales.”