CEDOS Feedback to the ‘Funding for Levelling Up’ enquiry undertaken by the Levelling Up Committee
CEDOS is the representative voice of senior Economic Development professionals from the public sector across England. We aim to share knowledge and good practice, engage with senior decision makers and sector experts and influence economic development policy.
CEDOS and our membership lead on developing economic strategy and also deliver a range of interventions that support long term growth, including regeneration and place-making, transport, business support and inward investment, skills and employment interventions and economic partnerships.
Our experience and the range of members we represent mean we have a contribution to make to the debate in this area. After consultation with our members, we would like to provide the following feedback to the Funding for Levelling Up enquiry being undertaken by the Levelling Up Committee.
The question that has been most relevant to our members has been “How can funding focus on both wider regions, as well as individual towns?”
- How can the Government ensure that all areas that need funding for Levelling Up receive adequate support with the bidding process and subsequently receive adequate funding?
CEDOS are keen to see that Government continue to support the Levelling Up agenda, which we interpret as a broad agenda covering a range of economic and social imbalances across England – including between and within large urban areas, former industrial areas, market towns and rural areas.
The characteristics and challenges of these areas often means different solutions are required to support economic growth, quality of life and civic pride. However, these challenges often do not require a plethora of initiatives and funding streams, just the ability to be flexible in approach.
Our members have stated allocations of resources based purely on competitive bidding does not direct resources to the areas that need investment the most. It also does not underpin long term strategic approaches to growth and place making that are critical to delivering Levelling Up.
There needs to be a process where investment goes to the areas that have the greatest need, reflecting there are pockets of deprivation and need in some of the more prosperous areas. We acknowledge that Government investment needs to be supported by having in place a viable, well evidenced and adequately planned Investment Plan(s).
We believe the most flexible way of helping local areas to prepare high quality investment proposals is to provide flexible, ongoing revenue funds, rather than capacity building funds when opportunities arise. This allows for a more strategic approach to growth and place making, rather than reacting to short term or time limited opportunities. It also provides ongoing skills and capacity to prepare the complex business cases and Investment Plans – rather than having to buy in expensive short-term capacity.
We feel Local Authorities are best placed to lead and manage this process on behalf of their communities.
- What are the challenges of competitive bidding and will this impact areas with limited resources and capabilities for bidding?
Competitive bidding creates challenges for all areas. The most common element is the risks associated with pulling together a comprehensive and often expensive business case, only for many areas to receive nothing from the process.
The expense is not just in financial terms, but also the mission drift and opportunity cost across many local partners pulling staff capacity away from their day jobs.
Competitive bidding encourages interventions that are ‘project’ based rather than integrated around a comprehensive programme. This stifles innovation, encourages short termism and activity often engages the easiest to engage first (be that individuals or businesses) – rather than those that would benefit the most from support.
Areas with the greatest levels of disadvantage or the problems associated with rurality often have the greatest challenge in developing interventions that are competitive and as cost effective.
Across the board, unit costs can be higher, benefits can take longer to realise due to relative starting points and strategic opportunities and added value is harder to achieve (such as collaborations with universities, offering integrated transport linkages or having the capacity to offer wide ranging or mixed use proposals).
Without ongoing revenue based investment for areas lagging behind, City Regions or areas with larger Combined Authorities or those with the most capacity or opportunity will be the areas that can develop the most convincing proposals and secure investment. This is exacerbated when the investment is short term and requires an active pipeline of projects and programmes that are investment ready.
- How does levelling up funding integrate with other funding streams such as the Towns Fund, the High St Fund, the Sustainable Transport Fund etc?
The allocation and delivery of all Levelling Up related funds needs to be co-ordinated at a local level. Having disparate funding streams does not create an effective platform to deliver regeneration and economic growth and achieve Levelling Up. Where there are Unitary Authorities or Combined Authorities, there is often a single accountable body for these activities. In two tier areas, funding sits across different Authorities. In these cases, it is harder to integrate these investments in a coordinated and operational way.
The current climate of rising costs has meant programmes are looking to each for additional resources to cover financial gaps and there is no process for dealing with this strategically as all the funding streams are separate.
- How can the Government achieve its aim of streamlining funding for Levelling Up?
A single integrated investment programme is the most effective means of ensuring funding is streamlined. Streamlining is not just about simplifying the process within Whitehall, but also making processes simpler for Local Authorities and other bodies involved in the delivery of schemes on the ground.
The recent Rural England Prosperity Fund (REPF) is a good example of how topping up an existing programme could simplify the processes involved in programme delivery. Integrating a DEFRA programme within a DLUHC programme with a single management framework (which will hopefully be the case with REPF) should reduce the monitoring and reporting requirements.
However, the timeframes of announcing this fund after Local Authorities have prepared their UK Shared Prosperity Fund Investment Plans was very unhelpful. The capital only nature also creates problems, especially over a two-year programme. There are also no additional management resources, which again has impacts on capacity.
This model could be utilised across other programmes also going forwards.
- How can funding focus on both wider regions, as well as individual towns?
There is a balance to be achieved between strategic investments that can have an impact over a wide geography, that can operate at scale to provide effective and impactful interventions and engage key partners (like Universities) – and interventions that focus on place and are more focussed on locally based requirements. This area is of key interest to our members.
Recent years has seen the strategic investment role being filled by Local Enterprise Partnerships, EU Structural Funds programme and Upper Tier Authorities. However, many District Authorities had limited access to place-making and shaping funds.
The balance in Levelling Up funding has now shifted heavily to a localised, place-based focus, with limited success. This has come at the expense of strategic schemes that focus on the productivity that will be needed to grow the economy.
The arbitrary allocations of schemes such as Towns Fund and Future High Streets Funs will undoubtedly improve a number of premises in the high streets of the areas lucky enough to secure investment – but it is not occurring within a long-term strategy that will encourage business confidence and encourage private investment
There needs to be a long term and balanced approach to investment that can both provide the locality based investment in public realm, economic infrastructure, economic inclusion and employment programmes and the larger strategic programmes to engage businesses, tackle skills shortages, develop key sites and support innovation – that have an impact on a wider geography.
Consideration needs to be given to the role of Upper Tier Local Authorities as a convenor of strategic programmes within their area and as a convenor to bring these two elements of economic development together.
- How can Government ensure that spending across all departmental budgets can be adjusted accordingly to ensure all of government is focused on achieving levelling up and that resources are directed to the areas most in need?
The most effective way to achieve this outcome is to engage with localities to understand the implications and opportunities linked to Government departmental spending decisions and Levelling Up.
With regards to discretionary funds, we have highlighted the opportunity of combining funds through the UK Shared Prosperity Fund, but also some of the considerations to make this process effective.
CEDOS would be happy to facilitate a discussion in this area.
- How are Levelling Up projects being measured in terms of value for money and for their contribution to Levelling Up?
A frustration for many local areas recently has been a lack of early stage guidance as to what is expected of areas in terms of delivering outcomes towards Levelling Up based funding.
Locally, contributions towards the Levelling Up agenda are generally measured against local priorities. The link to the national Levelling Up missions is unclear in local performance management frameworks at present.
Benchmarking is commonplace for assessing value for money in local projects – often referring back to ESIF frameworks. Value for money has traditionally been measured on a unit cost basis, which significantly disadvantages areas without major agglomerations in their economies such as rural areas of those with concentrations of disadvantage. Outcomes are also harder to achieve in short timeframes in these areas.
Current inflation and its impact on costs is making value for money increasingly hard to assess.
- Is the UKSPF a sufficient replacement of the European Structural Investment Funds?
Ultimately, the processes to support areas to ‘Level Up’ are long term and any additional funding needs to be long term also. Whilst there were limitations to the EU Structural Funds programme, there has been a relative consistency in approach over time and a level of investment that could support change. The UK Shared Prosperity Fund, at the scale proposed, is not sufficient in timeframes or resource levels to be an adequate replacement.
The 7-year investment cycle of EU Structural Funds provided some element of continuity, compared to what is likely to be only two and a half years for UKSPF. There has been a tendency for long term projects with continual investment under this process – but again this can be seen as a positive in terms of continuity of provision, or a negative in terms of lack of innovation and responses to cyclical economic change.
EU Structural Funds, under the last round of investment, removed much of the postcode lottery for receiving allocations of investment (although actual amounts varied considerably) and this is something that has been continued by UKSPF.
- How should the success of Levelling Up funding be measured against the Government’s desired outcomes for Levelling Up?
Understanding the impact of localised Levelling Up projects on the national Levelling Up missions is an area that needs further development so local areas can articulate their likely impact.
As we have previously stated, Levelling Up should not always be measured purely against national outcomes. Intra-area challenges of inequality and lack of opportunity are equally important – but will probably have little bearing on national level outcomes. If any funding allocation process is purely based on impacts on national outcomes – it will preclude this type of Levelling Up activity from securing investment.
Within the Levelling Up White Paper was a commitment to increase the use of new sources of real time data to support areas understand their Levelling Up challenges and to build on the Subnational Data Strategy. One of the challenges of the pandemic has been the rapidly changing circumstances on the ground that local data simply cannot keep up with, often only available on an annual basis. The use of real time data, if this is practical and achievable, could create radical change in how Local Authorities and their partners deliver local services and stimulate growth.
- How will the proposed Investment Zones contribute towards the key objectives of Levelling Up? And is this different approach the right approach?
Given the announcement in the Autumn Statement relating to Investment Zones, we do not feel we have anything to add to this point.
However, it has been difficult for Local Authorities to prepare expressions of interest for the programme at short notice – and for it to be ultimately scaled back and refocused is disappointing.