Top down, piecemeal and lacking a clear strategy, the announcement of the second tranche of the Levelling Up Fund underlines everything that is wrong with this government’s approach to local growth. But it also signalled how we can set things right.

Nothing could be further from levelling up than this. Last week, the successful bids to the government’s Levelling Up Fund were announced after a fraught bidding process where local authorities, combined authorities and county councils scrambled against one another for small amounts of central government funding. In total since 2020, £3.8bn of funding has been pledged by government to local areas, but this comes after spending cuts of £15bn (or 37% of central government grants) during the austerity years.[1]

Central government cut local government spending more than any other part of the public sector during austerity and the poorest areas bore the brunt.[2] During the period of 2013-2017, the most deprived 20% of areas experienced an average cut in central government funding of £233 per person, compared with £135 per person in the least deprived areas.[3] This had disastrous economic and social impacts, with one study finding it cost 9,600 lives as reductions to services like housing, planning and homelessness prevention badly harmed health.[4] The Levelling Up Fund does little to reverse this trend – while more deprived areas will receive more money than less deprived areas, it will be a fraction of what was lost during austerity. For the poorest local authorities with successful bids, we estimate the latest tranche will amount to around £110 per person (see chart) – but this will be spread over several years.[5] The funds must be used by March 2025 or 2026 for larger projects.[6]

There are huge differences in the sizes of the successful bids, which appear to bear little relation to deprivation. For instance, Rutland, which is one of the least deprived places in the country, will receive £23m – which works out at £608 per person - while East Linsdey in Lincolnshire, which is one of the most deprived local authorities, will only receive £8m – amounting to £59 per person. The Prime Minister Rishi Sunak’s own constituency of Richmond in North Yorkshire also does well out of this arrangement – bringing in £19mn or £361 per person.[7] So while higher deprived places are more likely on average to have received funding than less deprived ones, the amount each successful place has received is not necessarily greater in more deprived areas. In some cases, it’s far less after taking population size into account.

The successful projects are an eclectic mix of transport infrastructure, town centre regeneration and small number of cultural and educational projects. How any civil servant could objectively compare and appraise these projects from hundreds of miles away is anyone’s guess, but Whitehall has found a way. Despite the fact that the National Audit Office previously criticised DLUHC’s approach to levelling up funds for failing to learn lessons of past local growth initiatives, the show must go on. [8] It will now be up to places to get these projects off the ground, which has been something of a challenge so far - only 5% of the money from the first tranche of the Levelling Up Fund was spent by the end of last year.[9] I Successful bids maybe, but given the small size of funds spread over many years, it will only impact places at the absolute margin. These are the lucky few who made the cut – in total 529 bids were made for funding and only 111 of those were successful.[10] For the many hundreds who submitted failed bits, there has been no feedback on what went wrong.

The UK is one of the most geographically unequal countries in the developed world. OECD data at small regional level shows that the richest 20% of UK regions were three times as large as the bottom 20% in terms of GDP per capita (see chart). Only Hungary, Colombia and Turkey fare worse than this.[11] Against this stark reality, levelling up has long been a smokescreen for managed decline. Far from transforming the economic opportunities of those living in deprived places through better local public services and a coherent industrial strategy, the concept has been a chaotic mix of rhetoric, small funding pots and continued Whitehall control. The Levelling Up White Paper, while arriving with much fanfare and massive in length, contained no clear definition of levelling up, reasonable set of metrics for evidencing success or clear policy ideas for advancing the agenda – bereft as it was of Treasury investment.

But at least by showing how not to do local growth, this government’s version of levelling up brings into stark focus what needs to change:

First, there is no getting away from the fact that local government requires more money. Many councils have been stripped back so far that their roles are increasingly reduced to social care and bin collection. Some areas are innovating to try and make up for the lack of state capacity, working closely with businesses and the voluntary sector, but it is hard to fill the void of 30% funding cuts especially for areas where there are fewer dynamic businesses to support good employment and local tax revenue.

Second, new money should be allocated according to need - using a transparent formula such as the indices of multiple deprivation, where there is no question of patronage in how the money is divvied out. Pots should be consolidated and there should be no competition between areas based on arbitrary and subjective judgement.

Third, local areas should be empowered to make their own long-term decisions about how to prioritise new resources, with support from central government in measuring success and evidencing what works. This will require greater devolution of powers which will enable areas to reinvest in preventative local public services like housing, education and skills, public health, youth services and early years which are so important for community cohesion, economic activity and population health.

There is a way back from this mess. The UK doesn’t have to be one of the most centralised and geographically imbalanced advanced economies. It doesn’t have to face continuously stagnating heath, rising mortality rates and falling life expectancy for the poorest. It doesn’t have to live with the worst rates of productivity growth in the G7 – driven at least in part by austerity and persistently high inequality. These are all politically driven choices that can be consigned to the dustbin of bad public policy. Let the levelling up funds sound the death knell of Oliver Twist style, cap in hand local growth policy and unleash the power of places.