Levelling Up

Baroness Penn Excerpts

Wednesday 22nd November 2023 Lords Chamber

[Lord Stunell (LD)]

My Lords, this is a sad and disappointing Statement. It is another signal that levelling up, which was the flagship policy of the last Prime Minister but one, is on its dying breath. The Statement was delivered by a junior Minister in the other place. It rehashes announcements that have already been made. It glosses over failures of process and delivery, and it trumpets success when it is in full retreat. It starts with a boast about the £13 billion allocated to the levelling-up task, which is the same £13 billion that had already been announced five times before. But it overlooks what the National Audit Office said in its report published this week: much of the money will never be spent because of the overweening departmental bureaucracy and long ministerial delays in signing off projects with sponsors.

In fairness, the Statement does contain a sort of “sorry, not sorry” section about changing the process in the future, establishing a long-overdue but non-specific “funding simplification doctrine”, of which the noble Baroness just spoke. I am sure it will be a belter when it comes, but the benefit of the new doctrine will be lost by what is perhaps the most gobsmacking piece of double-speak in the Statement. Apparently rounds 1 and 2 have gone so well that, after learning from their successes, round 3 has been cancelled. Usually, back in the real world, if a project goes really well in its first two stages, everyone is eager to get on and do the third stage—but not this time. Instead, the approval threshold for projects is to be lowered and schemes previously rejected in rounds 1 and 2 will be reconsidered. There will be no round 3 and no chance for further bids to be submitted.

The National Audit Office reports that rounds 1 and 2 generated 834 bids, but three-quarters of them were rejected. I have no doubt that there will be some very good schemes among those rejected before that fully justify their approval now. Like the noble Baroness, I welcome the announcements made, but that has been done by pumping money originally intended for round 3 bidders back into the original pool for round 1 and round 2 bidders. This clearly demonstrates that the contention of these Benches was exactly right that the overall size of the pot was always minuscule compared to the need.

That leaves some of the most deprived councils, and the smaller and less well-resourced ones, stranded. They are the ones who did not bid in earlier rounds because they could not afford to take the risk of investing time and money in a bid that had only a 1:4 chance of success. Encouraged by the July announcement that a new and simpler process was ready to come into play, they have been ready to step forward and do so, but their chance has now gone. There will be no round 3, no new bids, and no levelling up for them.

I have two questions for the Minister. Will she publish the list of local authority areas that did bid in rounds 1 and 2 but will still not benefit from any funds from any of their bids, despite the clawback of round 3 money to help? I will call that list A. It would give a good map of where the Minister thinks that levelling up is not really needed. Secondly, will she publish a list of those local authority areas from which no levelling-up bids at all have yet been received? I will call that list B. That, I fear, would give a good map of small, under- resourced local authorities that have been left stranded by the cancellation of round 3 and are left out of the picture altogether. Publishing lists A and B would be a long-overdue first step to restoring transparency and trust to what, up to now, has been an opaque and desperately underfunded bureaucratic disaster. I look forward to the Minister’s answers.

[The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Penn) (Con)]

My Lords, I thank the noble Baroness, Lady Taylor, and the noble Lord, Lord Stunell, for their questions. I start by challenging a few of the assertions made in their responses to the Statement, particularly about underfunding and the minuscule amounts of money that have gone into this project.

Levelling up is at the heart of this Government’s mission: it has been backed with significant financing through the levelling-up funds and a number of other initiatives, and we have seen more in the Autumn Statement today. For those areas that have bid into the levelling-up fund and have been unsuccessful, it is not the end of the story: we have an agenda across government, whether through devolution, investing in skills, investment zones, freeports, or a whole number of areas where opportunities continue for areas to receive funding for projects that are important to them. On Monday, 55 projects were announced, but the total is 271, which is not an insignificant number of bids. These were across the country, representing areas that are diverse but also in need of this funding.

I also address the point around smaller, less well-resourced councils that felt unable to bid in earlier rounds. Some funding was made available for those who would struggle to put together bids to be able to participate in that process, so that is not the full picture. Also, the feedback that we received on the competitive process for rounds 1 and 2 informed the approach that we took for round 3 and informs our approach to the funding simplification doctrine, which acknowledges the valuable contribution of competitions for driving value for money and identifying the best projects for certain programmes. We will continue to deploy them where they make the most sense, but we encourage the use of allocative approaches where they can best achieve specific outcomes while minimising demands on local authorities. At the heart of that doctrine is our commitment to value for money, which will drive decision- making on the most appropriate choice of funding mechanism.

The Government have responded to the feedback they had in earlier rounds of the levelling up fund in their approach to round 3. I reject the Liberal Democrats’ proposition that the 55 projects that received funding in this round are somehow of lesser quality than projects that received funding in previous rounds. In fact, we found that a very high number of very high-quality projects had bid into this system, which allowed us to return to those projects for round 3 and make great allocations for very well-deserving projects. To reassure the noble Baroness, we touched base with local areas to ensure that those projects continue to be priorities for them and deliverable. However, having made the formal announcement, we will also recontact every single one of those successful local authorities to reconfirm that they are projects that they would like to pursue and, on the delivery point, meet a delivery timetable that is achievable given the changing circumstances.

Those changing circumstances were a factor acknowledged in the National Audit Office report. We have faced a time of high inflation, particularly for capital projects, and labour shortages. We also acknowledge some challenges in the way we ran the process in government too, so we welcome the work that the NAO has done and have taken significant action to address the points it made. I point out that the data that the NAO used in its report was cut off in March 2023 to allow it to analyse consistently across three different projects that the Government have been running. Since then, we have released a further £1.5 billion of levelling-up funding through the programme, so significant progress has been made.

We have also made changes to how the projects are run—for example, allowing greater decision-making for local authorities to flex their delivery programmes to meet the new circumstances they find themselves in. We have also made £65 million available to ensure that local authorities have the capacity to deliver the levelling up fund projects that they have successfully bid for. The Government acknowledge some of the challenges in the National Audit Office report. We have already taken steps to address some of those points and seen a significant increase in the amount of money disbursed.

Finally, on the funding simplification doctrine and what it will mean, it is a doctrine that will apply from central government to local government in its approach to levelling up. That is primarily from the Department for Levelling Up, Housing and Communities, but it applies across other departments’ delivery of and commitment to our levelling-up agenda with local authorities. We will evaluate the simplification pathfinders as quickly as possible. In all the work we are doing on these new projects and programmes, we seek to learn the lessons from them as we go along, ensuring that we have robust evaluation processes in place that allow us to continue to make these modifications and improvements as we deliver our levelling-up agenda across the whole of the United Kingdom.

[Lord Young of Cookham (Con)]

My Lords—

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[Baroness Taylor of Stevenage (Lab)]

There is time. I asked questions about Northern Ireland, about inflation and about impact assessments. May I have a response to those in writing?

[Baroness Penn (Con)]

My apologies; I think I answered about the impact of inflation and the fact that we have adjusted the project delivery processes to help take that into account with local authorities. The pathfinders are under way and we will assess the outcomes of those as soon as we can, but I also said that we will seek to learn the lessons as we are implementing, not just waiting for the final evaluation at the end of the process.

On Northern Ireland, the noble Baroness is absolutely right that there were no allocations in round 3 of the fund; I reassure noble Lords that this funding has not been reallocated to other parts of the UK and will remain reserved for and be provided to Northern Ireland. We will continue to work closely with the projects that have already been awarded the £120 million in the first two rounds of the fund. We are working towards the restoration of the Northern Ireland Executive and will work with a restored Northern Ireland Executive to find the best approach for them going forward.

I am happy to have another look. If there are any points that I have missed, I will make sure that I write to both noble Lords on them.

[Lord Young of Cookham (Con)]

I apologise to the noble Baroness, Lady Taylor, for barracking her when she quite rightly asked a supplementary question. I warmly welcome my noble friend to her new responsibilities and say how much she will be missed at the Treasury. We hope she will be able to adopt a less restrictive approach to her new portfolio than the one she was obliged to adopt at the Treasury.

Many of us found the tone of the earlier intervention somewhat grudging, and I know these funds will be warmly welcomed by the communities to which they are targeted. Will my noble friend confirm that it is the Government’s firm policy to streamline all these different pots of money which go from central to local government, and really have proper devolution? The Statement mentions the levelling up fund, town deals, the shared prosperity fund, the future high streets fund and others. Can we streamline things without having a fund simplification pathfinder pilot? Perhaps it could be simpler than doing that.

Finally, the Statement refers to new funds and the principles that could be applied to them. Do we really need any new funds, given the ones we already have? The objective should be to reduce rather than to add.

[Baroness Penn (Con)]

I thank my noble friend for his warm welcome to this role. I reassure him that the department is absolutely committed to simplifying our funding approach when it comes to levelling up and local authorities. I reassure noble Lords that the funding simplification doctrine will be implemented from 1 January next year. Its aim is to embed our commitment to simplifying the funding landscape by ensuring that government departments consider the principles of funding simplification when designing new funding for local authorities. To the noble Baroness’s point, the idea is that it extends beyond the reach of my department alone. The doctrine will cover all new funds that are made available exclusively to local authorities by central government, but it excludes funding within the local government finance settlement and services mandated by statute. That gives a better idea of the shape of that approach.

However, it is right that where there are specific problems that may need to be addressed with specific parameters, the concept of a new fund is not entirely ruled out from that approach. The pathfinders, which are important in allowing us to make sure we learn as we go and then apply the approach more generally, are looking at what flexibilities can be applied across those different funding streams, and at putting local authorities in the driving seat in identifying where their priorities are and using the funding made available from central government more flexibly.

[Lord Walney (CB)]

I refer your Lordships to my entry in the register as director for the Purpose Business Coalition’s levelling-up goals. Are the Government still committed to the 12 medium-term missions set out in the levelling up White Paper of February last year? If so, what is being done across Whitehall to drive those missions? Will there be the annual update on them that was promised in that White Paper?

[Baroness Penn (Con)]

I assure the noble Lord that we are absolutely still committed to those 12 missions. There is a huge amount in today’s Autumn Statement that shows our commitment to delivering some of them—for example, through the allocation of further money to levelling-up partnerships and investment zones and pursuing greater devolution. We are taking other measures—for example, legislating to create a smoke-free generation that will help deliver the health and life expectancy-related missions—so there is work across government that will continue to deliver on those 12 missions.

[Lord Naseby (Con)]

Is my noble friend aware that, if we go back in time, the concept of levelling up when I was the leader of the London Borough of Islington was never even thought about? This is a huge step forward as a concept. When I first became a Member of Parliament, I represented a fourth-stage new town. The lessons learned between the experiences of first-stage new towns right the way through to the fourth stage were huge. The fourth paragraph of the Statement states:

“For instance, we have given local authorities greater freedom to adjust their town deal, future high street and levelling up fund projects”.


That is central today. Can my noble friend make sure that towns that have done it well are given huge publicity so that others can learn from success?

[Baroness Penn (Con)]

My noble friend makes an important point about learning as we go and understanding what is effective in delivering our mission to level up. We have put in place comprehensive plans and published how we will approach evaluating the success of some of these projects. Of course, as part of that we want to publicise those projects that have had the biggest impact so that not only do they get the recognition that they deserve but others can learn from them.

[The Lord Bishop of St Albans]

My Lords, I declare my interests as president of the Rural Coalition and a vice-president of the LGA. The 9.6 million people living in rural areas are glad that there is a mention of rural in the opening paragraph, but we cannot quite see how that rolls out. I wonder whether the Minister can help us a little. One of the crucial things about rural sustainability, improving levels of employment and offering healthcare in rural areas is digital connectivity, yet 17% of rural houses are not on superfast broadband, and nor are 30% of rural commercial premises. How does this relate to the need across the country to roll out a much higher level of rural connectivity? It has been done with a fantastic project in Cornwall and a lot was done in Shropshire at one stage, so it can be done. How do we get that sort of rural levelling up in digital connectivity?

[Baroness Penn (Con)]

The right reverend Prelate makes a really important point. I know that the Government have significant ambitions in rolling out access to superfast broadband and making sure we cover off the last mile, as it were, to the harder-to-reach places. I am not familiar with the detail of that programme as it lies in another department, but I will of course write to the right reverend Prelate about how we are doing on delivering that digital connectivity, in particular in rural areas.

[Lord Weir of Ballyholme (DUP)]

My Lords, can I press the Minister a little further on the situation as regards Northern Ireland? The rationale given by the Government for not announcing allocations to Northern Ireland in this round is the absence of a fully functioning Northern Ireland Executive, but that does not hold water for two reasons. First, these are allocations to local government authorities—I speak as a former president of the Local Government Association in Northern Ireland—and in Northern Ireland local councils have been functioning throughout. That has remained unchanged within Northern Ireland for decades as they are continually operating. Secondly, the Government did make allocations to Northern Ireland in the previous round in 2022 when, similarly, there was no Northern Ireland Executive functioning. Can the Minister explain why there has been a change in the position as regards the funding allocations to Northern Ireland between 2022 and 2023?

[Baroness Penn (Con)]

My Lords, the noble Lord is absolutely right that there was funding under previous rounds. However, it is right that the UK Government take a cohesive look at where investment is needed and, given the budgetary position faced by the Northern Ireland Executive and the absence of devolved institutions, we need to look at that very carefully. That relates to his question because the longer we have an absence of any Executive in place, the more keenly we feel some of those pressures and the need to be able to take those decisions in the round. As I have said, this funding remains there for Northern Ireland; it has not been reallocated elsewhere. We are extremely keen to work with the Executive as soon as possible when they return, so that we can address all the challenges that face public services in Northern Ireland.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I declare my positions as a vice-president of the Local Government Association and the National Association of Local Councils. The Minister has used the phrase “committed to simplifying” a number of times. Would the simplest thing not be for Westminster to get out of the road and simply agree a funding formula to the areas of the country most in need of what has been identified as levelling up—areas with the lowest healthy life expectancy or the worst levels of child poverty? Should it not allocate a multiyear long-term funding stream to those areas to allow them to decide what projects they want to spend money on to improve the life of their communities? Is it not wildly inefficient, not to mention rather curious in light of the number of Tory-held constituencies that end up with funding—perhaps currently Tory-held is a better term—not to have a fair and transparent system, perhaps even one that could be agreed across all political parties, so that people could be confident that this would go on for the long term and local communities could make decisions for themselves and invest consistently?

[Baroness Penn (Con)]

I absolutely reject the noble Baroness’s assertion that this funding has been allocated in an unfair or untransparent manner. Alongside the projects that have received funding, we have published a clear methodology note about how we have approached the allocations. Although I may have heard worries about the pace of delivery and the amount of money available, I think that overall both Front Benches opposite welcomed the announcement that we made on Monday. On the overall approach to local government finance, we have a system at the moment that recognises needs. It means that those councils with the most deprived households within them get 17% higher funding per dwelling than those with the fewest. I recognise the calls for wider reform to local government funding but noble Lords will know that, in the wake of Covid and other uncertainties, this Government made a commitment that while we should press ahead with that, it would not be for now but for the next Parliament.

[Lord Scriven (LD)]

My Lords, I welcome the Minister to her post and I will be quite parochial. As somebody who was born in Huddersfield and now lives in Sheffield, I welcome the allocation that has been made to the Penistone line. But living in Sheffield, which is the fourth-largest city in England, our eyes roll when there is talk about levelling up because in the middle of this levelling-up agenda, our direct train between Sheffield and Manchester Airport has been taken away. How does it contribute to the levelling-up scheme when a train from a main airport to the fourth-largest city is taken away in the middle of that? What pressure will the Minister now put to bear in her new role to ensure that the train is reinstated? The reason for taking it away was because of rail infrastructure issues and it is really important that the train is reinstated, particularly if levelling up is going to take place between those two great, dynamic cities.

[Baroness Penn (Con)]

Perhaps, given the strength of feeling that the noble Lord has on this issue, I could undertake to find out more about the rationale for that decision and write to him in particular on it. More broadly, one decision that we have taken recently, which I know has not been popular across the whole House, has been to not continue with the further leg of High Speed 2, to enable us to make sure that we are investing in transport projects that will provide greater connectivity to more people faster than would happen under the plans for the next leg of HS2. That shows this Government’s commitment to levelling up.

[Lord Berkeley (Lab)]

My Lords, perhaps I could ask the Minister a bit more about the costs to the local authorities that have been successful. Of course, I welcome all that. I have been involved in watching a very large award from the first round to the Isles of Scilly for a new ferry, and I am very grateful to the Government. But the cost of doing a strategic outline business case, an outline business case and then a proper business case was so high that, in fact, the Government have very generously allocated some extra funding to enable the councils to do it. This must apply to many other small councils in receipt of these bids. If they cannot afford to prepare the documentation for the next stage, or even to get there—because they will not get the money until the final business case hurdle is done—is there any way that the Minister can simplify the process without, of course, affecting the normal procurement rules of government?

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[Baroness Penn (Con)]

The noble Lord has pointed to one of the solutions in his question. In some circumstances, it might be appropriate for government to provide support to those councils or areas that struggle the most with the process to give them the capacity to engage with it in the first place. However, there are also things that we can do to try to simplify the processes that local authorities go through, while still ensuring that quality is maintained. We can simplify them—or, for example, in our approach to monitoring and evaluation of a lot of these projects, we have taken the decision to remove the local obligation to undertake that and will provide a central function to do it. So we can provide central support for local government and we can provide direct funding to local government to be able to engage and participate, but we can also simplify the process to try to remove the costs and drive value for money.

[Lord Liddle (Lab)]

I am so glad to see the noble Baroness in her new place. Do the Government agree with the analysis of Andrew Haldane, the former chief economist of the Bank of England and now director-general of the Royal Society of Arts, that one reason why Britain’s growth and productivity performance is not as good as it should be is the widening regional differentials in England between London and the south-east and the city regions of the north? If the Minister does agree, what conclusions does she draw about what kinds of policies are likely to be most effective in closing that gap?

To speak personally, when I look at quite a lot of the projects that have been approved, they are smallish-scale projects worth £10 million to £20 million, a lot of which are designed to improve town centres. I am in favour of repurposing town centres, but I do not think that we can ever take them back to where they were. Should we not be looking for big, transformative projects? Of course, that is why the cancellation of HS2 was such a big blow.

[Baroness Penn (Con)]

My Lords, I agree with that central point: that is what is driving the whole mission behind our work to level up. We need to do both of the things that the noble Lord talked about. We need to fund projects that restore pride of place to towns where people live and give a strong sense of local community, but we also need to fund those larger-scale transformative projects. The amount of funding, for example, that has gone into transport projects in mayoral combined authorities and other areas over recent years is very significant. We also have projects to develop investment zones and freeports, for example. So we should not see the levelling-up fund, and the projects that take place through that, as the only way in which we are delivering our agenda.

On the point about funding, whether it is for large or small projects, I will just add that it is also about devolving power—something that the noble Baroness mentioned at the very outset. Today, in the Autumn Statement, we have confirmed four new devolution deals for Greater Lincolnshire, Hull and East Yorkshire, Cornwall and Lancashire. We are also deepening the settlements for our existing institutions, because we need both power and money to flow down to local areas so that they can level up.

[Baroness Bennett of Manor Castle (GP)]

My Lords, since we have time, and since the Minister is getting to grips with her new portfolio, I will raise a somewhat conceptual point. Has the Minister considered that levelling up also means that there is a counteracting force, namely the concentration of power, resources and development in London and the south-east, which they are struggling to cope with? In Cambridge, for example, a proposed development of 1,000 homes was recently turned down because there was not enough water supply for those homes. Does the Minister see that continuing overdevelopment—the pushing of money and resources into London and the south-east—is a countervailing force to attempts to level up?

[Baroness Penn (Con)]

I do not think that that is the way in which I will be approaching my new department and role. I think we can both continue to invest in London and the south-east as great places to live and work and an important part of our economy and also invest in levelling up across the rest of the country. I acknowledge, however, that when you have denser populations and more competition over resources, it adds pressure. Those are different forms of problems that big cities, with high development needs, might need to address versus rural areas, as was highlighted by the right reverend Prelate. We need the right approach for the right area, which is part of what devolving power allows us to do.