Billions for levelling up ‘wasted’ as ministers pick wrong projects and ignore ‘what works’, study warns

Spending watchdog criticises £4.8bn Levelling Up Fund and £3.2bn Towns Fund for not being ‘based on evidence’

The criticism comes as Michael Gove finally unveils the levelling up strategy (UK Parliament/Reuters)

Billions of pounds spent on “levelling up” may be wasted because ministers are picking projects too small to revive poorer areas and failing to analyse “what works”, a damning report warns.

The study – released as a long-delayed blueprint for Boris Johnson’s flagship policy is unveiled – sharply criticises grants from the £4.8bn Levelling Up Fund and £3.2bn Towns Fund for not being “based on evidence”.

The spending watchdog rebukes ministers for failing to produce a proper business case, while ignoring advice that small schemes “do not usually drive significant growth”.

The report comes after criticism of “pork barrel politics” as allocations from the two funds favoured Conservative areas – for voter-friendly improvements such as libraries and leisure centres.

The levelling up white paper will signal a return to Labour-style target-setting – abolished by David Cameron in 2010 – with a warning it will take a decade to reap success.

It will set out 12 legally-binding “missions”, including to increase pay, jobs, investment, transport connections, home ownership and school results in poorer areas, while cutting crime.

Every area will be offered a directly-elected mayor, if it wants one – but ministers will admit it will be only a “starting gun fired on decade-long project to level up Britain”.

But the National Audit Office (NAO) is warning Michael Gove’s levelling up department “has wasted opportunities to learn lessons” about what will be successful.

As a result, “it doesn’t know whether billions of pounds of public spending has had the impact intended,” said Gareth Davies, the head of the watchdog.

The head of the Commons Public Accounts Committee, Labour’s Meg Hillier, accused the government of having “turned on the taps without really knowing where to direct the hose”.

And the Local Government Association (LGA) warned councils’ efforts are hindered by being forced to bid for “small pots” of cash, which left them unable to “plan strategically for their communities”.

The prime minister has been on the back foot over levelling up since a disastrous speech last year, in which he admitted he had only “a skeleton” of a plan.

Mr Gove, the levelling-up secretary, is believed to have a lost a battle with Rishi Sunak, the chancellor, for more cash – helping to delay his white paper, first promised last September.

The Independent revealed how almost £2bn has been slashed from promised development funding, through a failure to match EU funding lost because of Brexit.

Meanwhile, Labour research found that 144 areas receiving levelling up cash are still each £50m out of pocket, on average, because of a decade of cuts.

The NAO report highlights the scale of the task, with the gap between rich and poor areas in the UK “among the largest” of any developed nation.

Some £11bn is earmarked for local economic growth between 2020 and 2026, also including the Shared Prosperity Fund – meant to replace lost EU funding, but cut to £2.6bn over three years, not a promised £4.5bn.

The NAO criticises the levelling up department for:

* Rejecting “expert advice” that only “major physical regeneration” can deliver economic growth – not better “cultural assets”.

* As a result, making it “hard for local authorities to plan the joined-up investment strategies that the department’s research suggests are needed to promote local growth”.

* Making local councils bid for cash from multiple pots, which creates “uncertainty for local leaders” – often requiring them to “find alternative sources of funding.”

* Producing only a single business case for the Levelling Up Fund – instead of going through the standard three stages.

Mr Davies: “With its focus on levelling up, it is vital that the department puts robust evaluation arrangements in place for its new schemes to promote local growth.”

Mr Johnson said on Tuesday: “Levelling up means giving all young people, no matter their background, the skills they need to realise their potential.”