Funding is key issue for levelling up, say analysts

Policy experts have broadly welcomed the Levelling Up White Paper, but questioned whether there would be enough money to achieve its aims.

Christopher McKeon
Wednesday 02 February 2022 16:27
Michael Gove has unveiled the Government’s long-awaited plan to achieve its levelling up agenda (Steve Parsons/PA)
Michael Gove has unveiled the Government’s long-awaited plan to achieve its levelling up agenda (Steve Parsons/PA)

The Levelling Up White Paper is “a step in the right direction” but could struggle to reverse the past decade of cuts without adequate funding, analysts have said.

The White Paper, published on Wednesday after numerous delays, set out the Government’s plan to achieve its flagship policy of reducing inequalities between the UK’s regions, including more regional devolution and greater investment in poorer areas.

Torsten Bell, chief executive of the Resolution Foundation think tank, said the White Paper was “George Osborne plus New Labour” and combined “the devolution of the former Conservative chancellor with the bigger and more activist state focused on deprived areas of the last Labour government”.

His colleagues at the foundation, Lindsay Judge and Charlie McCurdy, were broadly supportive of this combination, saying: “Visible local leadership is important for both outcomes and as an end in and of itself, as is the accountability and focus that comes from measurable targets to improve outcomes and close gaps across a range of essential economic, public service and social metrics.”

There is a growing body of evidence that spending on schools and council services matter for outcomes, especially among the most deprived and those with greater needs

IFS analysis

But analysis from the Institute for Fiscal Studies (IFS) suggests that the legacy of Mr Osborne’s austerity agenda could make achieving the Government’s 12 “missions” difficult.

According to the IFS, councils serving the most deprived areas saw spending on non-education services fall 31% per resident between 2009/10 and 2019/20, while those serving the least deprived areas saw spending fall just 16%.

Meanwhile, education funding has become less targeted at schools with the most deprived pupils.

Similarly, Ms Judge and Mr McCurdy said: “Promises of prioritising capital investment in poorer regions via R&D and housing spend will not swiftly offset the legacy of poorer areas having received much deeper cuts to day-to-day public spending – think schools and local government – over the past decade.”

The IFS analysis said: “These trends matter for aims to level up health and education across the country. There is a growing body of evidence that spending on schools and council services matter for outcomes, especially among the most deprived and those with greater needs.”

It added: “The role of broader tax, public spending and public services should not be forgotten. Public services matter for people’s outcomes, and in recent years the way funding has been allocated to different places has often worked against ‘levelling up’.”

The IFS suggested an early “win” in the long-term levelling up project could be to ensure tax and spending was “aligned with the levelling-up agenda through, for example, updated funding formulas that target funding at poorer areas, and a revalued and reformed council tax”.

The White Paper does not contain any radical overhaul of spending or taxation policy, but does commit to ensuring funding allocations are based on “an up-to-date assessment” of councils’ needs carried out “over the coming months”.

It also envisions less “place-blind” spending thanks to more detailed data and an increased weighting for “spatial considerations” in decision-making.

But firmer spending promises are largely focused on physical or transport infrastructure and disbursed from pots of money via competitive bids.

This process has been criticised for allocating funding according to how well local authorities can write and submit bids, rather than need and leading to relatively wealthy such as Bromsgrove receiving large grants from levelling up funds while Knowsley, one of the most deprived boroughs in the country, has received nothing.

Jonathan Carr-West, chief executive of the Local Government Information Unit, said: “If we want places around the country to level up and stay levelled up, we need to build genuine capacity.

“That can’t be done if local areas are kept dependent on Whitehall for funding and approval, going to them cap in hand.”

While the White Paper promises to “streamline” the bidding process and reduce the number of individual pots, the principle of competitive bidding for growth funding looks set to continue.

Money therefore looks like it will remain a key issue.

Mr Carr-West added: “Accomplishing the paper’s 12 missions would undoubtedly make a country a better place, but it remains to be seen whether the Government has the appetite to unlock the local innovation and autonomy that we will need to make that happen.”

IFS director Paul Johnson said: “This White Paper recognises the scale of the levelling up challenge. That lack of quick fixes, the long-term perspective, and clarity about objectives are all very welcome, as is the recognition that real progress will require a change in governance in Whitehall and beyond.

“This is all just a very first step though. The targets are largely in the right areas, but many look extremely ambitious – that is to say highly unlikely to be met, even with the best policies and much resource.

“There is little detail on how most of them will be met, and less detail on available funding. There is something for everyone, and hence little sense of prioritisation: ambition and resource will be spread very thin.”

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