Levelling up – like most political slogans – can mean different things to different people. In the time since Boris Johnson used the phrase in his 2019 general election victory speech, he has done little to define what exactly levelling up will mean for the country. The Levelling Up Fund prospectus, published last week, was the first real attempt by the government to add substance to the rhetoric. Unfortunately, we are still somewhat in the dark.

The prospectus divided local authorities in the UK into three categories based on an index which considers each place’s need for ‘economic recovery and growth’, ‘improved transport connectivity’, and ‘regeneration’. Category one is the highest priority for investment from the £4.8bn Levelling Up Fund, with category three the lowest. Given the government has not published the methodology behind the index, CPP has conducted detailed analysis to understand how local authorities in each category differ.

As we might hope, local authorities in the highest priority group perform worse across a range of economic indicators (see table 1). Local authorities in category one are on average the most deprived, both in overall terms and when split into individual components (income, employment, education and health). They also tend to be less productive and are projected by CPP to recover more slowly from the economic impact of Coronavirus.

In addition, category one areas score poorly on average on the CPP Inclusive Growth Index, which combines data on consumption, healthy life expectancy, leisure, inequality and unemployment. They have suffered from higher budget cuts over the decade of austerity, with total service expenditure down by 22% on average in category one areas between 2009/10 and 2019/20, compared to 13% in category three areas.

Table 1: Average performance across a range of economic indicators by levelling up category

However, averages can only tell us so much about the nature of these groups. While it is true that, on average, category one local authorities perform more poorly than categories two and three, there is significant variation within the groups. As chart 1 shows, there are some areas in category one which enjoy low levels of deprivation and high levels of productivity. Similarly, there are category three areas which suffer from low levels of productivity and high levels of deprivation. This picture is repeated across all the indicators included in table 1.

For example, Richmondshire and the Derbyshire Dales are only the 256^th and 263^rd most deprived of the 317 local authorities in England yet are in the highest priority category. Sefton, on the other hand, is the 58^th most deprived, but is in the lowest priority category. Craven has an output per hour of only £25.80 – almost £10 below the UK average – but only makes it into the lowest priority category.

Chart 1: Distribution of the deprivation and productivity of local authorities by levelling up category

Given one implied aim of the Levelling Up Fund is to deliver economic growth and regeneration, the government should be looking to invest in industries with the potential to boost productivity in the parts of the country that need it most. In a recent report, CPP identified 63 opportunities to invest in high value added sectors to boost productivity in 54 low productivity areas. 36 of these places are in category one and 15 in category two. Yet there are still 10 opportunities in the government’s lowest priority category three. These include civil engineering in Craven in Yorkshire; metals, electrical products and machinery manufacturing in Gwynedd in Wales; and chemical manufacturing in South Lakeland in the North West. CPP argues for investment in social and physical infrastructure as a driver of inclusive recovery and growth. Our analysis here suggests the government could be missing a trick in its allocation of the Levelling Up Fund.