The Department for Levelling Up has defended its process for awarding local government funding, which allows ministers to set the final criteria for bids after seeing a list of shortlisted towns.
DLUHC has rejected a recommendation to overhaul its process for allocating the Levelling up Fund, in which ministers finalised "principles" for awarding cash only after seeing the identities of councils that had been shortlisted by officials, and the scores they had been given.
In June, MPs on the Public Accounts Committee said they were “concerned over the timing of ministerial input for funding awards” and criticised the lack of transparency over the final criteria – noting that DLUHC had not published information on “the location and type of unsuccessful versus successful bids”.
Responding to the report last week, the department said it had “followed a robust decision-making process” for the £1.7bn first round of the Levelling Up Fund that MPs had criticised.
The department rejected the MPs’ recommendations to set principles for awarding funding before ministers are told the identities of shortlisted bidders, and to provide “thematic and geographic transparency of successful and unsuccessful bidders”.
MPs said the “unsatisfactory” process meant ministers had decided on the principles only once they knew which bids would win funding.
Officials ranked bids against published criteria and passed a shortlist of the highest-scoring bids to ministers, who made the final decisions based partly on the scores but also on other considerations such as geographic spread within and between regions or nations; and past investments.
In its response to PAC, DLUHC maintained that “ministers have discretion to make choices about how to prioritise and apply” these considerations.
“To weigh these considerations up, ministers need access to information about where the bids are located together with historic investments that have been directed there,” the response said.
“When reviewing the location of bids, the identity of the local authority applicants will be clear even if their names are hidden. For this reason, the department does not consider it sensible to hold back the names of local authority applicants whilst minsters agree how to apply the wider considerations.”
When the funding formula was revealed, critics slammed the principles as "baffling" for giving disproportionate weight to road travel and a failure to include deprivation as a metric.
DLUHC also said it had set out the process before bids were shortlisted, in the Levelling Up Fund prospectus and technical note.
The department said it also published an explanatory note once 13 decisions were made, which set out that all ministers had confirmed they had no constituency, personal or pecuniary (monetary) interests in relation to the fund.
PAC said the government had made efforts to improve transparency compared to the previous schemes run by the Ministry for Housing, Communities and Local Government (which became DLUHC in September 2021).
The committee slammed the government in 2020 over how the £3.6bn Towns Fund was allocated, saying some towns were chosen by ministers despite being identified by officials as the very lowest priority.
Concerns about the scheme resurfaced recently when former chancellor and Conservative Party leadership candidate Rishi Sunak boasted of changing funding formulas to put less money into deprived urban areas and more into places like Tunbridge Wells, a prosperous town.
The Towns Fund, which was introduced in 2019, prioritised Sunak’s North Yorkshire constituency of Richmond for extra cash ahead of poorer areas like Salford.
PAC said, in its June report, that the department had improved on its “past form” and called for it to go further and publish information on the balance of successful and unsuccessful bids by theme and geography. DLUHC agreed to this recommendation.
The department accepted the MPs’ six remaining recommendations but said it rejected some of the criticisms underpinning them.
For example, DLUHC rejected claims from MPs that decisions on the UK-wide Levelling Up and UK Shared Prosperity funds are being administered without sufficient consideration of devolved governments’ priorities.
The department said it had told local authorities in Scotland, Wales and Northern Ireland in its guidance that they needed to show how Levelling Up Fund bids aligned with, or complemented, wider public service investments made available by the devolved administrations.
And the department said it adapted the allocation method for the UK Shared Prosperity Fund for each devolved nation and, in Scotland and Wales, delegated delivery of the funds to local authorities.
The department said it is also seeking input from devolved administrations on projects to be delivered in their geographical areas whenever possible.
DLUHC also rejected the committee’s claims that it does not have a good understanding of how it will measure progress on levelling up missions across the UK and that it does not yet have a strong understanding of what works to achieve local growth.