Levelling Up, Housing and Communities Committee 

Oral evidence: Funding for Levelling Up, HC 744

Monday 23 January 2023

Ordered by the House of Commons to be published on 23 January 2023.

Watch the meeting 

Members present: Mr Clive Betts (Chair); Bob Blackman; Mrs Natalie Elphicke; Kate Hollern; Andrew Lewer; Mary Robinson; Nadia Whittome; Mohammad Yasin.

Questions 162 - 270

Witnesses

I: Dehenna Davison MP, Parliamentary Under Secretary of State for Levelling up, Department for Levelling Up, Housing and Communities; and Jessica Blakely, Director of Levelling Up Major Programmes, Department for Levelling Up, Housing and Communities.

Examination of witnesses

Witnesses: Dehenna Davison MP and Jessica Blakely.

Q162       Chair: Welcome, everyone, to this afternoon's session of the Levelling Up, Housing and Communities Select Committee. This afternoon we are continuing our inquiry into funding for levelling up, one of the key priorities of the Government. Indeed, they named a department after it, it is that important. We will come over to the Levelling Up Minister in a minute, but before we do, I ask members of the Committee to put on record any interests they have that may be directly relevant to this inquiry. I am a vice-president of the Local Government Association.

Mohammad Yasin: I am a member of Bedford Town Deal board.

Kate Hollern: I employ a councillor in my office.

Bob Blackman: I am a vice-president of the Local Government Association and I employ councillors in my office.

Mrs Natalie Elphicke: I am a vice-president of the Local Government Association and in this context both of my councils, district council and county council, have just been successful in Levelling Up 2 but they were not successful in Levelling Up 1.

Mary Robinson: I employ a councillor in my office, and I am a member of the Cheadle Town Funds board.

Chair: I wasn’t going to put on record that my council has not been successful at the beginning, but we will begin from there.

Kate Hollern: I declare my council did get some Levelling Up 2 funding.

Chair: I am sure there will be more of that to come during discussions but, Minister, welcome. If you would introduce yourself and your official, that would be really helpful.

Dehenna Davison: I am Dehenna Davison, the MP for Bishop Auckland and the Minister for Levelling Up. I am here with Jessica Blakely.

Jessica Blakely: My name is Jessica Blakely. I am the Director of Levelling Up Major Programmes. We look after various programmes, including the Levelling Up Fund.

Q163       Chair: When we had the Levelling Up White Paper, which was the start of this process leading on to the Bill, the Government set out their various priorities, their missions. Annual reports will be produced as well, with information about what progress has been made. Could you confirm, Minister, that the Government will be producing annual reports with the assessment of progress? Will the first one be produced this spring?

Dehenna Davison: Thank you, Chair. Yes, we will be producing annual reports as we committed to as part of the White Paper. On timing, Jess, I am not sure if you have that off the top of your head, but I may need to write to you with more specifics on that.

Jessica Blakely: I don’t have the timing for the next one, but we have been producing reports on individual funds. We quite recently published the freeports one.

Q164       Chair: Right, so we can’t tell when the annual report pulling everything together will happen?

Dehenna Davison: Not at the moment. I wouldn’t want to mislead you by coming up with a date ad hoc, but I will write to you with some further clarity on that.

Q165       Chair: Okay. Normally we are told that they will be “soon”, “shortly” or “a bit later”, but we will find out a precise date in correspondence. That will be helpful to the Committee.

We were also promised that there would be an attempt to pull together matters that are across Government, because levelling up was not just a DLUHC responsibility; it was for the whole of Government to address. We are going to have levelling up directors appointed who could help to pull that together and engage with local councils. How many have been appointed so far?

Dehenna Davison: No levelling up directors have been appointed thus far. We are currently reviewing the process internally to figure out the best course of action moving forward for appointing said directors, but that is not to say that work is not going on across Government to pull together levelling up. Some of the funds that we have available are cross-departmental funds and we also established an inter-ministerial group, which is chaired by the Secretary of State. That pulls together Ministers from other Government Departments to look at the work we are doing collectively and see how we can progress it further.

Q166       Chair: The directors were a pretty fundamental part of the proposals, weren’t they? How many months now since the commitment was made to appoint them?

Dehenna Davison: There was some work done over the summer with some interviews run for levelling up directors but, as I say, we want to make sure that when we put directors in place they are doing the right work and we have the right people there. There is a bit of an internal review going on at the moment, but we will write to you as we make further progress.

Q167       Chair: Does that mean that we might not end up with any levelling up directors—the whole idea might be revised?

Dehenna Davison: They were part of the Levelling Up White Paper. We made that commitment in there, but we are just making sure that we get it absolutely spot on.

Q168       Chair: I don’t understand the answer. What are you trying to get spot on? Either you are going to have directors or you are not.

Jessica Blakely: I think what the Minister is trying to say is that we are reviewing that process at the moment. As she mentioned, we have been doing a recruitment process to look at the levelling up directors. As part of that recruitment process, we have realised that that might not be achieving exactly the aims that we had hoped for. That is why there is a review at the moment and instead looking towards elected officials to look after—I think it is over half the population across the UK. It is definitely a pause and reassessment.

Q169       Chair: On whether you will have directors at all?

Jessica Blakely: Whether we are appointing the directors through the process is my understanding, yes.

Q170       Chair: I still don’t understand the answer. Is there is a reconsideration of whether you will have directors?

Jessica Blakely: There is a reconsideration about whether we are going to appoint directors out of that specific process. Part of that reconsideration involves whether or not we will have directors at all, I am assuming, but that is basically not the question that we have answered as yet because that forms part of the review, if that makes sense.

Q171       Chair: What other process could you have?

Jessica Blakely: There are different ways of providing that local leadership. For example, with the mayoral deals that we are currently doing, there is definitely a need to provide local leadership absolutely front and centre. In the White Paper there was a reference to the levelling up directors. Having run a process, that has surfaced up additional information that we need to consider and come back to.

Q172       Chair: It sounds very much like you are considering again whether you should have levelling up directors.

Jessica Blakely: It is part of the question, but we have not answered that question as yet.

Q173       Chair: We also have a Levelling Up Advisory Council and I have some names of people who are on that, so that does exist. Does it do anything?

Dehenna Davison: Yes. The Levelling Up Advisory Council meets regularly. The Secretary of State and I have attended the last two meetings, if I remember correctly, but certainly two since I was appointed in September. It meets to discuss a range of levelling-up interventions. They do work on high street regeneration and various other things.

Q174       Chair: Does it simply talk to you as a council, or does it produce anything in writing?

Dehenna Davison: There is work produced and recommendations made to us as well about how best we can perform our levelling-up functions.

Q175       Chair: Is that available for the rest of us to have a look at?

Dehenna Davison: I am not certain but I will check on that, Chair, and I will write to you with further clarity.

Q176       Chair: It was announced as a very important body. Very important bodies are obviously producing very important reports. It would be helpful to see them if they are really influencing what the Government do.,

Dehenna Davison: Absolutely. I will get you some further clarity on that, unless you have anything to add to that, Jess.

Jessica Blakely: No.

Q177       Chair: When we had the Permanent Secretary in, I think he said they were still trying to get data from across Departments, not just DLUHC, about funding on levelling up. We have had a letter from him, which is mainly about DLUHC’s funding and not much about anybody else’s funding. Why is it taking so long, given that this is a cross-Government priority, to get the various funding streams pulled together so we can see what in total Government are spending on the various bits for levelling up?

Dehenna Davison: Clearly, as you have alluded to, this is an important piece of work. Levelling up is not just being delivered through our Department. Other Government Departments are doing fantastic work: Transport, Education and elsewhere. That is why we are trying to pull all of that data together to give a clear cross-governmental picture of what is happening on the ground. You have written to me, Chair, about the Spatial Data Unit and we have provided a bit more clarity on that in writing to you. That is part of the picture that is working with all the other Government Departments to try to extract that information and make sure that we can put it out there in an easy-to-digest manner.

Chair: We will probably come to the Spatial Data Unit in just a minute and find out what its 38 staff are actually doing. There are one or two questions that I am sure Mary Robinson wants to follow up on.

Q178       Mary Robinson: Going back to the Levelling Up Advisory Council, it was set up to support the delivery of the levelling-up missions, and we know what the levelling-up missions are. How is it set up with its criteria to carry out its work? Does it have a set of principles to which it is adhering? How is it set up?

Dehenna Davison: It is a group of people with expertise from across a whole range of sectors. The Chair alluded to knowing a few of the names on there. It is a good, experienced body. They have a workstream plan that they are working through at the moment to help them feed into what the Government are doing and look at where we are being successful, and where we probably need to do more work. Jess, is there anything that you would like to add?

Jessica Blakely: I think that is a very good description.

Q179       Mary Robinson: I am trying to get to how are we able to see what they are doing, their mission statement, their tick-box of activity.

Dehenna Davison: I am certainly happy to write with further detail on this, if that would helpful.

Q180       Mary Robinson: That would be brilliant. Thank you very much. I will go on to some questions around data and metrics. We understand that the Index of Multiple Deprivation was not used to measure need for the Levelling Up Fund Round 1. Why was the alternative method for measuring need preferred by the Department despite the concerns raised by local government?

Dehenna Davison: After the first round, we took on board a lot of feedback that we had had from right across Government, from colleagues in this House and others, as to how best we make sure that Round 2 works in the most effective way to deliver on the reasons that we set up the fund in the first place. Our concern about using the Index of Multiple Deprivation as a single tool was that it did not necessarily match up entirely with the aims of the fund. For example, it did not take into account productivity, transport connectivity and so on. On that basis we designed our index of priority places, which takes into account a whole range of factors specifically for the Levelling Up Fund, just to try to make sure that we are getting a whole full picture of the situation around the country.

Jessica Blakely: I think that is exactly right. It is the variety of elements that the Levelling Up Fund is trying to address and although the decision criteria that have been set out in the technical note include place and deprivation within it, it is certainly not the only assessment. There is an economic assessment and a strategic assessment. The index is trying to match what the purpose of the fund is.

Dehenna Davison: There was some concern that the Levelling Up Fund is UK-wide and yet the data on the Index of Multiple Deprivation across Scotland and Wales, for example, is not necessarily identical to that in England. It might have meant that we were not having a fully fair comparison between the DAs and England. We wanted to make sure we had a model that was one size fits all that we were using across the whole UK.

Q181       Mary Robinson: And one that people are able to easily understand; I guess that would be part of your thinking on this. On the productivity element, I am quite interested in this because one of the ongoing debates that basically existed from the beginning—remembering back to Northern Powerhouse—was based around the inequalities and the differentials between the north and south, particularly in indices of deprivation but also productivity linked to them. Are you still following up on that link between the indices and productivity and the need to close that gap?

Dehenna Davison: I think it is a consideration right across Government, isn’t it? If productivity is lagging behind in one part of the country, the whole country is at detriment, so of course that is being considered. That is why we were very keen to include that consideration as part of our index of priority places as part of Round 2 of the fund.

Q182       Mary Robinson: Going further on to data, and you have alluded to it, Ministers have told us that the Government do not currently hold data of “sufficient quality” about all Whitehall Departments’ expenditure on the full range of funds. How is the Department measuring success or failure of levelling up if there is not any data of sufficient quality available?

Dehenna Davison: That is exactly why we are trying to make sure that data is available by pulling together strands from other Departments, as I alluded to in a previous answer. The Spatial Data Unit is one element of that, and we are establishing the office of local government as well, which will be data driven to help demonstrate and display the performance and health of the local government sector. That will collate and present data about local authorities and how they are performing. I think the key element to this is through the Spatial Data Unit and getting information from other Government Departments so that we can present it in a digestible way. An important part of it is making sure that we have the data available but also that if people log on to look at it, they can understand what it means and see it simply.

Q183       Mary Robinson: How is it progressing?

Dehenna Davison: It is progressing; it is definitely progressing. The Spatial Data Unit is working incredibly hard with other Departments to make sure it progresses. Jess, do you want to give any more specifics on that?

Jessica Blakely: To be clear on the question about spend versus outputs, the spend is the input versus the output. When we look at our monitoring and evaluation and we talk about effectiveness, it is about the outcomes we want to achieve and how we measure progress towards those. The inputs will sometimes be very clearly from levelling-up spend and sometimes from a departmental spend, but that is one of the reasons it is quite hard to unpick that because the monitoring and evaluation that we conduct is very much more about the outputs that we are trying to achieve. When we look at the work that is done, when we talk, for example, about the ONS new local team and the Spatial Data Unit, they are also focusing very much on the outcomes and trying to monitor and evaluate where we are getting towards. I think you were asking about its focus of work, and that is potentially where the focus is rather than differentiating how it classifies the spend among specific things.

Q184       Mary Robinson: This will be important, because people are asking questions about why one bid was successful and another was not, and they are not understanding the criteria that were used. Will we be getting closer to understanding those criteria or will there always be something of the dark arts about it?

Dehenna Davison: For the Levelling Up Fund Round 2 we have published a pretty detailed technical note about how decisions have been made. I am sure we will come on to that in a bit more detail further into the Committee, but we have done our utmost to be incredibly transparent about that process and how the decisions have been made, very much so we are not accused of using dark arts to try to get to the outcomes.

Q185       Chair: To pick up on one thing about what the Spatial Data Unit is doing, we asked the Secretary of State previously whether levelling up is just about the pots of money—we will come on to the issue of pots of money specifically in a minute—whether it is about looking at the totality of Government spending and whether it is being altered or adjusted to reflect the levelling-up objectives. Is the Spatial Data Unit looking at how Government spending as a whole is supporting levelling up or just at the pots of money?

Dehenna Davison: My understanding is that it is about Government spending as a whole, because I think we know that capital pots are not the whole answer. It is why we set out those 12 missions in the Levelling Up White Paper, which go much beyond what any one or two capital funds ever could.

Q186       Chair: So it eventually ought to be able to give us a breakdown of Government spending geographically?

Dehenna Davison: That is the aim. That is why we are trying to gather all the data and why it is taking a while because ultimately we want to make sure that the right data is in there.

Q187       Chair: Again, the question is when.

Dehenna Davison: Soon, is all I can say. I wish I could sit here and give you firmer answers on certainty. The honest answer is I can’t at the moment, but we will keep you updated as best we can on that.

Q188       Chair: If we asked for a reply in the next six weeks about when a date will be, would that be reasonable?

Dehenna Davison: I will certainly do my best.

Chair: We might follow up in six weeks if we don’t hear. We move on to the whole issue of bidding, something that has been a vexed question.

Q189       Nadia Whittome: Competitive bidding is an expensive process that disproportionately favours larger authorities and those that can afford to pay consultants to write bids. Do you think that this is a good use of public money?

Dehenna Davison: I think that there is a place for competitive funds, but as the Secretary of State said, I think, when he was in front of your Committee, we are trying to move away from competitive funds. We recognise how burdensome they can be for local authorities and Members of Parliament who are campaigning on those bids, in both time and cash. We are exploring this at the moment to reduce the use of competitive funding but also to simplify the funding landscape.

Q190       Nadia Whittome: That brings me nicely to my next question. Minister, in a Westminster Hall debate in October you said, “Ensuring that areas have the capacity and experience to complete what can be quite lengthy and complicated bidding processes is something that has featured in my inbox quite a lot during my time as Minister. I am looking at funding simplification to see how we can make these processes simpler and more streamlined so that there are fair opportunities, even for smaller authorities.” What progress have you made towards the same, and what specific steps have you taken?

Dehenna Davison: I completely stand by all the words that I said then and very much maintain that attitude today. One of the steps that we have taken is to put in place a package of support that local authorities can draw upon to help them with competitive bidding, through finding them consultants to help them do that, through additional capacity support, and £65 million is being made available for that. Those are funds that are currently in flight so that they can look at how best they are using the money and progressing funds. Jess, do you want to add anything there?

Jessica Blakely: That is the capacity and capability funding that we have put together and are offering to councils, and also we provided capacity and capability funding as part of specific funds such as the Towns Fund. This new funding is to help areas build their capacity and capability to bid for funds but also reallocate funding if that is required for an adjustment to a particular project.

Dehenna Davison: We are very much putting our money where our mouth is on this in trying to help local authorities deliver.

Q191       Nadia Whittome: When the Culture Secretary, on a visit to the West Midlands on Thursday, was asked about Birmingham City Council’s failed bids, she told journalists, “It was made a rule that if you'd been successful in the first one, you couldn't be successful for a second one because we would have to spread that money around the UK.” Is this correct? If so, why has it not applied equally across the UK and why were local authorities that have been successful in the previous round encouraged to submit bids in this round, often at the expense of many thousands of pounds?

Dehenna Davison: It is a completely understandable question and one that I have certainly asked myself over the last few days. I think we need to look at the context of the overall Levelling Up Fund Round 2. It would have been impossible for us to predict the exact quantity of bids that we received but also the incredibly high quality of bids that we received. I think it was around £8.8 billion worth of bids for a total pot of £2.1 billion to allocate. That always means that really tough decisions need to be made about how the money is allocated.

Q192       Nadia Whittome: Is it the case that there was a rule?

Dehenna Davison: There was no rule initially. There was no rule certainly as part of the original bidding prospectus, but when it came down to making the ministerial decision on how the funding would be allocated, it was determined that to get the best or the geographical spread, which was a major consideration in the original prospectus, this probably would be the best route to go down.

Q193       Nadia Whittome: There was not a rule previously, but was the Culture Secretary correct or not when she said that there is a rule that if you were successful in the first round you could not be in the second round? Is that a rule now?

Dehenna Davison: It is certainly not a phrase that I would use, because there is not a rule as part of the fund. It was a decision that was taken to allocate the money and the formula that we used to allocate the funds from Round 2. It is not a rule of the fund more broadly.

Q194       Nadia Whittome: Okay, so the Culture Secretary was incorrect. Can you assure us that competitive bidding will be used less frequently in the future, perhaps only in unique circumstances and for larger pots of money?

Dehenna Davison: I can assure you that it will be used less. On that basis, we will be producing a funding simplification plan very soon, of which I am happy to provide further details when we get closer to the publication date. I can see the Chair looking at me and he is probably going to ask for that date. On that one, all I can say is soon, and I hope very soon. We are working on that at pace at the moment.

We are looking to move away from competitive pots. They will still be used in some circumstances, I am sure, because in some cases that competitive structure is important for encouraging innovation and creative thinking, but ultimately we want to move away from that. That is why we are looking to push forward our devolution agenda as well, where ultimately we put the power in the fund back in the hands of local people so that they can determine how best to spend it.

Q195       Nadia Whittome: I have two follow-up questions on that. First, can you describe what discussions took place in the Departments before deciding to launch a competitive bidding process for the £60 million Brownfield Land Release Fund 2 last week? What other options did you consider?

Dehenna Davison: The Brownfield Land Release Fund does not sit within my brief, so I am not necessarily privy to those specific discussions, but I am certainly happy to try to find further information and write to you with a follow-up on that. We have to be quite cautious of looking at funds that are already in flight—the Brownfield Land Release Fund is already in flight; it is a fund that we have used in the past and this was a new round of it—versus looking at new funds in the future and I think largely that is what our funding simplification plan will look at. For funds that are currently in flight, we don’t want to see too many changes, for fear of confusion in monitoring and so on for local government and local authorities. But for any new funds or new funding that becomes available, that is when we want to move towards a more simplified system.

Q196       Nadia Whittome: On pursuing devolution, it has been suggested that one of the main reasons that the Department seeks to use competitive funding is because of a lack of trust in local government. What do you make of that suggestion? What is your assessment?

Dehenna Davison: I don’t necessarily think that that is an assessment that I share at all.

Jessica Blakely: When you think about the competitive funding and the changes that we have made so far, we announced in the autumn statement that there will be trailblazer deals with greater devolution, and that is for Greater Manchester in England. That, to me, is a strong indication of the direction of travel. Also, we have the UK Shared Prosperity Fund, which is a very conscious choice to move away from competitive funding towards an allocation of funding, exactly for the reason that you mention about trust and trusting that local decisions are better made at local levels. Those are, as the Minister said, two significant new decisions where it demonstrates the direction of travel, even though some of the historical funding—following on from another round we don’t want to confuse the current process. There is a real step change with the new funds that we are doing.

Q197       Mary Robinson: In the past, capacity funding has been used where bids may have been successful but to develop the bids and get to the places they needed to get to. Will the new or the enhanced way of thinking about this capacity funding be the same, or will it be relevant to the disparity of various councils in the bidding process? In other words, some don’t have the resources to put in a good bid in the first place. How do you see that working?

Dehenna Davison: You are probably best placed on this one, Jess.

Jessica Blakely: Basically, the capability and capacity funding, which is the £65 million, is largely going towards areas that have current funds, for example if they need to reset those funds and they would not necessarily have the capacity and capability to do that. They can also use it to build up the capacity and capability, for example if they needed to bid for a future round of some kind of fund that we were putting together. It is the sort of money that you could use to, say, hire a consultant to put together a bid for you or, similarly, to hire a consultant to help you look at some existing spend and how you could spend that more effectively. We are finding that some of the bigger organisations can do that more effectively and we want to make that more equal across all of the different participants.

Q198       Mary Robinson: So it won’t be relevant to a bid in progress? Or will it be relevant to a bid in progress?

Jessica Blakely: Funding that is already allocated, for example.

Q199       Mary Robinson: Similar to the way it was previously rolled out?

Jessica Blakely: Previously what we have done, say for example with the Towns Fund, is to nominate a certain number of towns and then allocate a certain amount of capacity and capability funding to bid for that specific fund. This one is trying to be a bit broader and saying that it is not just if you are bidding for a new fund; it is also if you have in-flight spending that you are coming under pressure on and you need to look at that again. The larger and more well-resourced authorities may be able to get in a consultant and look at how they need to cost engineer that project, which the smaller operators are not able to do. It has that dual purpose and is able to be used across the full spectrum.

Q200       Mary Robinson: Just to be clear, what do you mean when you say “in-flight spending”? Do you mean a bid in progress?

Jessica Blakely: A bid—or, I suppose, it depends how you are describing a bid in progress. There is the bidding process, which I consider as one thing, which is more like the towns description I gave you. A bid in progress could be a successful bid that you are now in the process of delivering, and that is the capacity and capability. If that is what you mean by “in progress”, yes, that is in progress.

Q201       Bob Blackman: I have two quick follow-ups. On the question that Nadia asked, can you confirm that no organisation or local authority got more than a bid accepted in Round 1 and then they didn’t get a bid in Round 2, so there was no duplication at all? Is that true?

Jessica Blakely: There were two separate competitions, so definitely in Great Britain—we talked about whether it was a rule or a decision in the decision-making meeting, and we have the explanatory note about how it was not just the decisions that were made but the sequence they were made in. The Northern Ireland bid process was separate, but it was a decision that applied within the Great Britain process. It would have applied equally, and it is quite important to say that once those decisions were applied, Ministers didn’t take any bids on or off that list. That list was generated through those decisions and processes.

Q202       Bob Blackman: If organisations had applied in Round 1 and been successful and then applied in Round 2, they would be automatically excluded from the decision-making that Ministers took; is that right? I just want to be clear.

Jessica Blakely: To make sure that we get the sequence right, because it is important, they would have been on the shortlist. When the Ministers looked at that shortlist, they realised that they needed to make some tough and carefully balanced decisions about how to apply the £2.1 billion of funding to that shortlist. It is at that point that the finely balanced decision—having seen the shortlist, the decision was made to not fund bids that had received an amount of money in Round 1. As the Minister said, that is based on the quantity and quality of the bids that were received, which was not a predictable factor, but those bids were on the shortlist. They were at the decision meeting, and it was that decision that determined whether or not—

Q203       Bob Blackman: There are organisations that got more than one bid approved.

Jessica Blakely: No. So the outcome—

Bob Blackman: No one has got more than one bid approved?

Jessica Blakely: They would have gone into the decision-making meeting, but they would not have come out of the decision-making meeting.

Q204       Bob Blackman: An organisation of one of the members of the Committee here has.

Mrs Natalie Elphicke: Dover has two. We have got the Kent County Council and the Dover District Council.

Jessica Blakely: That is what I mean; it may be different authorities—lead local authorities.

Q205       Bob Blackman: We understand that there will be a third round, which we believe will be competitively bid. Are you going to make an announcement that anyone who has been successful in Round 1 or Round 2 will automatically be excluded from Round 3? This will be important for local authorities because we will spend money developing a bid and if we have no chance of success, tell us now, frankly. Can we be clear what the advice will be? I am sure local authorities will be listening to this very carefully.

Dehenna Davison: Yes, and completely understandably. I can’t give a great level of detail yet on what Round 3 will look like because that decision-making process is still ongoing. We are working with the other Government Departments that are part of this—Treasury, DfT and so on—to figure out what Round 3 will look like and what the parameters will be. If there is a decision made, for example, that certain authorities that have already been funded would be excluded, I would like us to make that known incredibly early to prevent any—I don’t want to say wasted effort, but the notion that effort has been wasted by local authorities.

Q206       Bob Blackman: We have a commitment from you, Minister, that an announcement will be made at the start of the process, so that people won’t waste money if that is the case. What happens if, as a result, not all the funds are expended?

Dehenna Davison: That is a decision to be taken based on that. I don’t want to get into things that are hypotheticals at this stage, but a decision would be made then on what happens with any remaining funds.

Jessica Blakely: I think that is a geographical consideration. The bidding process happens, the bids are received and the geographical considerations, which include the geographical spread that ended up with that decision being the result, are applied at the end of the process. That would be explained at the beginning of the process, but it is possible that it is not evident, like in this round, until the end of the process. At the time that the decision is made is when that gets—but I am sure what we are saying is that if it was decided at the beginning, it would be announced at the beginning.

Q207       Bob Blackman: Has any estimate been made of the amount of cost that local authorities and other bodies put in to bidding for this money?

Jessica Blakely: We have not estimated that centrally, but that cost is definitely why we have put together £65 million worth of funding for capacity and capability.

Q208       Chair: There will be a lot of people in local government pretty upset that the work they have put in was basically pushed on one side at the ministerial decision stage because they had already been successful in Round 1. We have to get to a point where we don’t allow that sort of competitive bidding to go on, and the amount of time put in, only to be excluded from consideration at the end, haven’t we?

Dehenna Davison: I will say again that in this case the incredible demand we had for the fund is clearly a huge positive, but that meant some really difficult decisions needed to be made towards the end of the process once all of the bids had been assessed and scored. This is part of the reason why we want to move away from competitive funds for all the feedback that we have had from local authorities and others. With the benefit of hindsight, had we known at the get-go that it would be the case that we would have over 500 bids, we may well have had a slightly different introductory prospectus available to local authorities to know whether or not they would have a decent chance of bidding, but unfortunately until the deadline passed and we had the bids in, we did not have that benefit of hindsight.

Q209       Chair: Before I move on to Natalie to look at some issues on funding, you are saying, Minister, that you want to get away from the competitive bidding process, and you have just explained it again, which was helpful. But where there are funds in flight, as I think you have referred to it—where some allocation has been made already—you want to keep this competitive bidding because you have already started it. Isn’t the difficulty there that given so many of these funds exist, to move to a completely different situation where you give to mayors and local councils the resources to make their own decisions on their own priorities, it will be a long time coming if you are still carrying on with these in-flight bids for several years into the future?

Dehenna Davison: Looking at most of the funds that are available, and there are some that have closed the bids now—for example the Towns Fund and town deals, the Levelling Up Fund, once Round 3 is over that fund will come to a close, similarly with the Community Ownership Fund and so on—broadly I think I am right in saying that by the end of this spending review, most of those funds and any bidding windows will be closed. That means the new spending review will present an opportunity to simplify and try to streamline.

Q210       Chair: Is that just DLUHC funding, or are there pots outside DLUHC that are still in flight that might continue for longer?

Dehenna Davison: I am sure that there are pots outside DLUHC. I don’t think you would expect me to be familiar with those, given they are not in my Department, but we are exploring the simplification piece with other Government Departments as well.

Chair: It might be helpful to have a more general Government response on that point in due course.

Q211       Mrs Natalie Elphicke: I will be asking about coastal communities and funding, but before I do, I have a follow-up question about the £65 million of support. How will that be allocated between the bids?

Jessica Blakely: It is not allocated between the bids. It is allocated between local authorities, the winning local authorities. It is not related specifically to the bidding process. It is related to the capacity and capability requirements of the local authorities. It is linked to their capacity and capability rather than a specific bidding process.

Q212       Mrs Natalie Elphicke: I am just reading the letter from the Permanent Secretary, and it says that the Government are making £65 million of support available to successful applicants to the Levelling Up Fund.

Jessica Blakely: Yes, but it is not as part of the bidding process.

Q213       Mrs Natalie Elphicke: For the people who have been successful in the last round as well as this round—

Jessica Blakely: Round 1 and Round 2.

Mrs Natalie Elphicke: How will the £65 million be assessed? Is it them asking you for support; are you assessing the support? How will that be assessed?

Jessica Blakely: It would be assessed on a fair basis across all of the different local authorities on need, rather than on the basis of funds.

Q214       Mrs Natalie Elphicke: So you assess?

Jessica Blakely: The contrast I was trying to draw out is between the Towns Fund, where it was specifically for the bidding process ahead of the bids, whereas with the Levelling Up Fund it is not as part of the bidding process.

Q215       Mrs Natalie Elphicke: It is the successful applicant.

Jessica Blakely: Yes, exactly.

Q216       Mrs Natalie Elphicke: Is there some criteria or basis on which this is being assessed?

Jessica Blakely: It is on the basis of what the requirements are on local authorities.

Q217       Mrs Natalie Elphicke: But you are deciding what you think the bases are of local authorities?

Jessica Blakely: Yes. It would be on the basis of something that can be fairly applied across all of the different—

Q218       Mrs Natalie Elphicke: You must have criteria to apply it. Could we have information about those criteria?

Jessica Blakely: Yes.

Q219       Mrs Natalie Elphicke: Thank you. I will move on to the question around the allocation of funds to coastal communities. I have the great pleasure of representing a wonderful coastal community, but it is the case, and Maritime UK has made this case, that for coastal communities there has been a strong target for arts, culture and tourism in the allocations that have been made. Maritime UK has made the point—and I have to say, representing such a community, I think it is well made—that it has not been for particularly well-paid or productive industrial jobs. Could you comment on that?

Dehenna Davison: I haven’t seen the report, so it is difficult for me to respond in full, but I am happy to see it and send a response in writing.

Q220       Mrs Natalie Elphicke: I don’t think you need to see anything to be able to comment on why there has been a focus on arts, culture and tourism in allocations of coastal communities funding instead of a focus on jobs, prosperity, growth and industry.

Dehenna Davison: I suppose the answer is when it comes to such funds, it is for local authorities to decide what they bid for specifically. If a bid comes in that is tourism or culture-related, that is the only bid we can assess against, whereas if a bid comes in on, let’s say, transport of whatever else, that is the bid that will be assessed.

Q221       Mrs Natalie Elphicke: It isn’t your view that in conversations with the Department there has been any steer in how coastal communities could assess, or any involvement from any of the cultural bodies to encourage this approach to them? It is entirely up to the local councils, with no steer?

Dehenna Davison: Not to my knowledge.

Jessica Blakely: Not that I am aware of.

Q222       Mrs Natalie Elphicke: As you are moving to look at the success of this in future funding rounds, would you consider looking at ensuring that there is a focus on well-paid industrial and other jobs in coastal communities?

Jessica Blakely: Funding generally is allocated with regard to value for money. Of that value for money, one of the assessments is jobs created. We also look at things like additionality and different sorts of applications. Those criteria are built in when we are looking at whether a bid is good value for money. Although a cultural bid could still generate jobs and have that creation, it is also looking across the whole suite of funds that we have, different types of funds, as we have talked about, for different things but there is a value-for-money assessment within all of that.

Q223       Mrs Natalie Elphicke: Clearly, there is always a value-for-money assessment in all funding. To try to draw down on this a little more, the key point that I am seeking to explore with you is whether you have made an assessment of whether or not the longer-term levelling-up objectives that the Minister helpfully mentioned have been fully considered in the nature of the allocations that have been made, if the bias for coastal areas has been towards arts, culture and tourism as opposed to looking at long-term, sustainable and high-paid employment. I think that is an important question that I hope you would be able to answer about how the overall allocations have been made.

Dehenna Davison: I think a key point to make is that the Levelling Up Fund is just one of a range of funds. I know that is the one that you are largely investigating as part of this Committee, but that is just one capital fund against a backdrop of many other capital funds and other kinds of funding being made available by other Government Departments.

Specifically on the Levelling Up Fund, as I mentioned before, up to now it is about the bids that are being made by local authorities. If there is a favour towards culture or tourism and so on, we can only assess based on the bids that we receive. I suppose the key question, if I have interpreted it correctly, is whether when moving into the future in other funding rounds we would make a push for different types of bids from coastal communities particularly. Is that about right?

Q224       Mrs Natalie Elphicke: Yes—what assessment you are making of that totality. I think you have absolutely hit the nail on the head, and perhaps it goes back to the earlier question about whether the Department is or is not able to assess all the funds that are going into a particular area. Clearly if there is a cultural fund available and that fund is not being used and Levelling Up is being used, I hope that the Department would consider that in the totality.

You have talked about potentially streamlining these funds and moving forward to that landscape. How are you going to assess the economic potential and viability for different areas, particularly coastal communities, in your new streamlining approach?

Dehenna Davison: That is precisely why we are working on this in such detail at the moment. This is an important piece of work and most of the conversations that I have with local authorities, elected officials or officers, are, “Make it easier for us, make it easier”. I think a lot of that goes down to autonomy for local areas, recognising that often local areas know far better what they need than we in Whitehall ever will but, of course, we are also talking about taxpayers’ money here, which means it is important that we have a good assessment and accountability framework in place.

As we move towards further funds, clearly we need to make sure that they are in line with our levelling-up mission, but I think that part of this again—not to keep coming back to it—comes back to devolution too, which I think is a vital tool, not just as part of funding simplification but as part of local empowerment as well. We see through some of the devolution deals that are already in place and also the trailblazers that we are currently working on—which I would love to give you more details of today, but I am afraid it is “watch this space” until they are formally announced—considerations being taken there are on how best we can drive forward local growth in, for example, Greater Manchester and West Midlands.

Q225       Mary Robinson: Very quickly on value for money, as you rightly say, it is important—it is taxpayers’ money after all—that we get this right. For a lot of the areas that are deprived, it will not be a quick fix in value for money. How do you factor timescales into that equation?

Dehenna Davison: I think it is an important question and something that clearly we need to consider as we are putting any new funds or funding into flight right across Government. We know, for example, about land values in certain parts of the country. The VFM figures would not necessarily reflect any net gain that we would make in certain parts of the country, for example some parts of London and the south-east where land values are much higher. It is incredibly important and we are definitely thinking about it.

Q226       Mary Robinson: Is there a limited timescale for value for money to be turned around, or are you prepared to say that this might not be immediate but we can see the benefit for—

Jessica Blakely: In the funding specifically, we have deliverability criteria. In those deliverability criteria we tend to assess projects that are able to start and get going. What we have said more generally is that for Government spending, levelling-up funding cannot just be thought of as the grant-making funds, which are very specific and more time limited. In the overall bid for Government spending, say a long-term transportation project or something that is a much bigger capital project, those value-for-money assessments are done using the Green Book principles. They are done over a long time and are then discounted back to present value to see if they are good value for money today. There are different funding sources that we use.

Q227       Chair: Coming back on that point, Mary, you have produced an interesting response from the Minister. It is about this increase in land values. It is a real problem, isn’t it? It is the Treasury Green Book that indicates it. It always means that you get better value from projects in the most affluent parts of the country, because land values will go up most for any building or other works that take place there, compared with the most deprived areas. The Secretary of State, to be fair to him, said before that he thinks that rule ought to be changed. Have you had any success with the Treasury on that?

Dehenna Davison: I am not sure that I personally have been privy to those conversations, but I certainly agree with the Secretary of State. I would like to see that rule changed. To clarify, for the sake of argument, that value for money—VFM—criterion is only one criterion that bids are assessed against to try to help mitigate that factor.

Chair: It is helpful for you to be so clear, Minister. That is helpful to the Committee; thank you.

Q228       Kate Hollern: You have clarified through Mary the criteria that I wanted to clarify, so thank you.

According to the IPPR, the north saw a 20% reduction of funding in the decade 2018-19, equal to £346.94 per person. The north-west is estimated to receive £47 per resident in the second round of Levelling Up. On that basis, to what extent will the Levelling Up Fund mitigate for the reduction of funding in local areas such as Blackburn, particularly over such a significant period?

Dehenna Davison: I should say that I was in Blackburn on Friday taking part in “Any Questions?” It was my first visit there and I had a lovely time. The cathedral is gorgeous.

That aside, I think that it is important to clarify that the grant funds that we are talking about today—the Levelling Up Fund and the others that we have mentioned—are not designed specifically to be a supplement or anything to local government funding per se. They are designed to try to achieve the aims of the fund, which in the case of the Levelling Up Fund is basically what it says on the tin, to try to help level up the country.

On funding per capita, taking not just the Levelling Up Fund but the funds alone that my own Department is responsible for—the Levelling Up Fund both rounds, the Towns Fund, the future high streets fund, the Community Ownership Fund and the Community Renewal Fund—when you look at the funding per capita breakdown, it is quite staggering to see that what most of us would probably think of as levelling up does come into play.

If I may give a rundown of some of those figures, which I hope will help with analysis, funding per capita for the north-east in those funds is £249, for the north-west £205, Yorkshire and the Humber £188, London £53, the south-east £69. I hope that demonstrates that, of course, we know that there are pockets of deprivation and need in London and the south-east but ultimately I think that most of us would recognise levelling up more broadly as being parts of the country that need it, of which there are more in the north. The north-east, the north-west, Yorkshire and the Humber and so on are benefiting the most from these funds. It is something that I am incredibly proud of as a Minister in this Department.

Q229       Kate Hollern: That is interesting, because a few times this afternoon you have said about putting power back into local areas, but the Levelling Up Fund is taking that away from them. The funding has been drastically reduced. They are then faced with the criteria to put in a bid at an average cost of £30,000 per bid. I think that you said there was 500, so I am sure Bob can do the calculation. It just does not seem to make sense, does it?

Dehenna Davison: I think it does make sense, but as I have said, it is difficult to conflate the issues of broader local government funding—the annual settlements—with the grant funds that we have made available, which are designed for a different purpose.

Q230       Kate Hollern: The grant funds are expensive and very unlikely to succeed—only a very small number actually succeeded—but at the same time, money from deprived areas has been taken away, which will make them more deprived and in more need of levelling up. You are almost measuring two different things, aren’t you? If we are talking about really levelling up, it is about improving health, job outcomes and education, and creating good, well-paid jobs. If the money is not going to the areas that need it most based on the criteria the Government have, how are you going to level up?

Dehenna Davison: The point that I made with the figures that I highlighted before is that the money is going to the areas that need it the most across the funds that we have available, whereas the broader local government finance settlement section is separate. Looking at the recent settlement, it was definitely much more generous as a percentage for areas that are in more need than it was for more affluent areas.

Q231       Kate Hollern: It is such a big drop over such a long period, and local authorities are constantly told they can bid in for Levelling Up. The Government cannot say on one hand, “It is okay, we are going to sort this with levelling up” and on the other hand say, “No, it is nothing to do with that”.

On Natalie’s point about Dover, Dover has a particular issue, but when you read the guidance that came out on the recent bids, tourism was a big part in coastal communities. If you have economically deprived areas like Blackburn, it should be more about local authorities having enough money to support people into good jobs as well as the ability to create sites for good jobs. It is different criteria in different places.

I would welcome you putting the money back into local areas so that local councils can make the decision, because they know best what they need. We are almost spinning plates with different funds, and I am not sure it is going to level up. On that basis, can you talk me through again Round 3 and how you are going to try to make it work?

Dehenna Davison: I am sorry to say I cannot give too much detail on that today, not because I am trying to use smoke and mirrors—

Kate Hollern: That is exactly the problem. There has never been enough detail for councils to understand what levelling up was and what case they had to make to demonstrate that their area needed that fund.

Dehenna Davison: At this stage, to respond to that, the only reason that I cannot give more detail today is because no decision has been made on what Round 3 looks like. It is not because I am trying to do any kind of smoke and mirrors; it is just that the decision has not been made, so it would not be professional or right for me to start speculating in front of your Committee today.

The point I make on this is that there is pretty decent and transparent guidance that is published as part of any bidding prospectus that local authorities can draw upon. Of course, there is the expertise of the regional and local teams from our own Department that try to aid in that process as well. One of the things that we are keen on is making sure that any unsuccessful bids and bidders receive good quality feedback so that they can see what may have gone wrong in that particular bid and we can help them to improve it for any future rounds. I cannot say that as a guarantee that future funding rounds will be successful because, again, it depends on the scale and the quality of the bids that come in from elsewhere, but certainly we are doing our utmost to try to improve the process, make sure it is transparent and open, and help local authorities to improve their bids to give them the best chance of success in future rounds as well.

Q232       Kate Hollern: Going back to Bob’s and Natalie’s earlier questions, if some of these councils have been successful in level 1 or level 2, are they going to miss out on level 3? At which point, should we be honest and say, “You are unlikely to get it because you have already got this, don’t waste your time and money” rather than you saying that we will give them support and expertise to bid for Round 3 when in truth they are not likely to get it?

Dehenna Davison: As I say, because it has not been decided yet how Round 3 will be structured and what those processes will look like, it is difficult for me to say. I would certainly like to see on the announcement of Round 3 some strong clarity for local authorities so that they know what the bidding process will look like and what those criteria will be. I just cannot commit today because that decision has not yet been made, that’s all.

Q233       Kate Hollern: Finally from me, would it be possible to get some anonymised feedback from councils on the process of bidding and the outcomes?

Dehenna Davison: I would have to check that back in the Department, but I certainly do not see any particular issue with that.

Jessica Blakely: For us to request feedback from them, is that what you mean?

Dehenna Davison: Yes, I think that we would probably need to formally request it and request that they are happy to share it, but I don’t necessarily see that being an issue.

Q234       Kate Hollern: If it is anonymised it doesn’t matter, does it? It would just be good to understand how councils went through the process, whether they were happy or disappointed, and the outcome. That may help shape how you are going to carry out Round 3.

Dehenna Davison: Absolutely. We have been taking on board the feedback that we have had so far, verbal or written feedback. Ultimately, sometimes it seems like we as Ministers try to make these things as complicated as we possibly can. It is really not the case. We are trying to design a process that is fair and transparent and trying to make sure that local areas feel like they are being supported by us, but when it is a competitive fund with a set pot, obviously a lot of places will be disappointed.

Q235       Mohammad Yasin: Can you please tell us what feedback the Department will be providing to those whose bids were unsuccessful in Round 2?

Dehenna Davison: In Round 1 we gave feedback through verbal sessions with the local authorities that had been unsuccessful, which we thought would provide the highest quality feedback. Unfortunately, we found that on a time basis that meant that it was a much lengthier period than we would have liked, just due to the time it takes to make every individual call. I think that feedback was delivered from November 2021 to January 2022, so a much lengthier period than we would have liked to see.

For Round 2 we have listened to that and tried to streamline that process. Instead, as a first port of call, written feedback will be provided to all unsuccessful bidders to outline where their bids did not quite make the cut. Then verbal sessions will be offered as a follow-up, but we are trying to strike the right balance between quick feedback to make sure that people hear in a speedy fashion, while making sure that feedback is also of a high enough quality to genuinely be useful, with the option of follow-up sessions verbally to ask any more detailed questions, too.

Q236       Mohammad Yasin: Can you commit today that in the future you will be providing timely and detailed feedback to those unsuccessful bidders?

Dehenna Davison: Yes.

Q237       Mrs Natalie Elphicke: I wanted to touch on the feedback. My council did receive it, and I sat in those sessions for feedback in levelling up Round 1. Some things that were fed back were things that we did not agree with. Certain information, had it been provided—well, actually, it had been provided but we had been marked down and so on. While the feedback was useful, there were elements where we did not agree with some of the marking scheme, the criteria or, indeed, the feedback that had been given.

The same would apply in this round. Obviously, we are delighted to have been successful this time, but I wonder, Minister, if you could give some thought to giving feedback to successful bids as well. If the intention is to build capacity and understanding about the bidding process, my own experience with Round 1 would suggest that continual feedback for both successful and unsuccessful bids would help all councils understand how the Department is perceiving the information that they are providing to it.

Dehenna Davison: I don’t think that is something we had plans to undertake, but I don’t see any reason why we could not provide that. I suppose the question is capacity. Clearly, the unsuccessful bidders are the ones most keen to find out, because most of those that have been successful are mainly so delighted they have been successful that they want to get on with delivering the said projects, which clearly we are going to be helping to support them with. Certainly, I can take that away and write to you with some clarity to see that we definitely have capacity to provide that.

Q238       Mrs Natalie Elphicke: If I may, I will briefly explain why I think that is important. The bids are put forward, as I know in my own area—being a priority 1 area, we have a large number of things that we would like to see taken forward—but some of that delay that you mentioned means that councils may not put projects forward for certain bids. It may also mean that they put projects forward but perhaps are not learning how to improve or strengthen bids in other rounds when they will only have perhaps one shot for a particular project. I think if the intention of the Department is to continue to increase and support capacity, that ongoing feedback would be very helpful to councils.

Dehenna Davison: I appreciate it as a suggestion, and I will take it away and write to you with a follow-up on that.

Q239       Andrew Lewer: Away from the media razzmatazz in London about the Brexit campaign, a lot of more detailed discussions elsewhere were about European structural funds, ERDF, ESF and so on. The UK Shared Prosperity Fund was announced and then it was announced again repeatedly for about three or four years without anything actually happening. Now that the UK Shared Prosperity Fund is established and under way, we looked into it as part of this inquiry. It was not just about levelling-up funds; it was about this as well. All the devolved Administrations spoke to us, and they all expressed their concern that the UK Shared Prosperity Fund is not a sufficient replacement of the European structural investment funds. English local authorities have expressed the same concerns to us, but the Government argue that UKSPF is a sufficient replacement. I am interested in why there is that quite profound difference of opinion. Has the Department done anything to try to address the concerns that have been raised about that perceived discrepancy?

Dehenna Davison: Certainly a lot of conversations have been ongoing between the Department, local authorities and the devolved Administrations as well about the Shared Prosperity Fund. It is probably helpful to outline the fund and which particular European funds it is set to match. One of the bits of confusion, if I can call it that, is that I think there has been a bit of a belief that it is to replace all European funding, whereas it was specifically the structural funds, the ERDF and the European social fund. We undertook some calculations to try to ensure that we were living up to our commitment to match or exceed that. If helpful, I could go into a bit of detail on that.

For the EU’s previous funding round from 2014 to 2020, we did an assessment of the annualised value of that, which we then converted at what was then the exchange rate of, I think, €1.18 to £1, which came to £1.3 billion and then was uprated for inflation. That is why we set the UK Shared Prosperity Fund funding at £1.5 billion to try to make sure that, in line with our commitment, it did match or exceed that level of European funding.

Another area that again is probably causing some confusion is that it is a tapered fund. As European funding tapers off, the level of UK Shared Prosperity Fund increases so that at the point at which European funds are no longer active, that is when the UK Shared Prosperity Fund will reach its maximum and ongoing level to make sure that there is no mismatch, because clearly that is not what the fund was designed to do.

Q240       Andrew Lewer: Some of the perceived discrepancy may be counting the UKSPF as a full replacement straight away, even when some of the European funds are still in place and fading out?

Dehenna Davison: That is definitely a fair analysis, yes.

Q241       Andrew Lewer: That is one, but are you saying that if the fund is only intended to replace ERDF and ESF, the discrepancy may come because of the European territorial co-operation funds and the Leader fund? Given that they are structural funds but they are not those two main ones, ESF and ERDF, are they included in your assertion that they are replacing European structural funds or are they held to be separate from the main two components?

Jessica Blakely: The ones that we are not dealing with ourselves are being dealt with separately. It is not that that funding is not being considered, it is not being considered as part of the calculations that the Minister just outlined.

Q242       Andrew Lewer: Is some of the discrepancy, therefore, that devolved Administrations are not counting the funding for those two funds that is now coming from elsewhere as part of their calculations as to what is coming from you?

Jessica Blakely: That is possible and we have been meeting with devolved Administrations, at official level as well as ministerial level, to try to understand some of those discrepancies. That is why we have worked out how we have arrived at the calculation, which is where the commitment has come from.

Q243       Andrew Lewer: One of the other issues with the UKSPF is that it has ended up with a very narrow window in which to spend the money, which is an irony alert considering what I said earlier about how long it has taken to be announced. There is the danger of the money now being spent in a hurry or even returned to the Treasury. What is the explanation for why it took so long to allocate those UKSPF allocations to recipients? Is that just a one-off and will they be informed of their allocations in a more timely fashion next time, or are we going to end up with a local government settlement type thing of everybody getting it just before Christmas?

Jessica Blakely: The UK Shared Prosperity Fund is over a number of years. The timing of the announcement this time came because it had to come after the autumn statement announcement. That was what drove the timing of this at that particular point. Now that we have those payments, we have made a number of payments in December. We are just about to make a number of payments as well in January, so we are going through the process of getting the money allocated. Future years are set out in the investment plans because they are multi-year plans. They are not single-year settlements.

Dehenna Davison: It is also worth outlining that where there is difficulty in spending the full amount that has been allocated to this financial year we are working with local authorities, assuming there is a decent, reasonable plan and explanation as to why it cannot be spent, to roll that over into the next financial year as well.

Q244       Andrew Lewer: That is very helpful. We are not going to end up with people trying to get it out of the door, which I would understand as a former council leader myself, but have some reassurance that as long as there is some outline of where it is intended to be headed, that will still suffice, given the short timescale this particular year?

Jessica Blakely: They need a credible plan that you would be able to spend the money in future years, but there is flexibility around being able to roll between different years.

Q245       Andrew Lewer: That is helpful. As I say, perhaps in other areas of DLUHC the benefits of multi-year spending settlements could be taken on board.

One of the perceived benefits of UKSPF, and certainly one I talked about when we were talking about leaving the EU, was the ability for it to be distributed at local government level and not bid for, which was a concern. While I regard that as beneficial, one of the consequences, whether intended or not, was some of those national ESIF funding allocations, like some of the university projects and so on, not able to receive funding in that way and, therefore, being at risk of not receiving funding at all. Are the Government and the Department looking at how to cover off what were national projects, even though they were part of European structural funds, in their funding envelope, even if it is not within UKSPF itself?

Jessica Blakely: On separate projects—I am not aware of the specific ones you are referring to—the UK Shared Prosperity Fund is targeted at local level, but if there are ones that you have—

Andrew Lewer: Some of the European funds were distributed to universities, for instance, rather than through local authorities.

Jessica Blakely: Exactly, and like we were saying with the grant funding and as we have been talking about quite extensively, we have different pots, and the UK Shared Prosperity Fund is very much for local spending at local level. I am not familiar with the university funding that you are talking about, but my assumption is that that would come out of different funding that is part of departmental budgets. That is something where we would need to check if it was related to a specific case.

Q246       Andrew Lewer: Could we put something together about that so that we can see perhaps where that has ended up getting to?

Jessica Blakely: Yes.

Dehenna Davison: Yes.

Andrew Lewer: Thank you very much.

Q247       Bob Blackman: On the consultation that took place with devolved Administrations, the evidence that we have suggests that the devolved Administrations believe that decisions were taken that infringed on their devolved policy areas. Could we be clear why there was limited consultation and why this overlap has taken place?

Dehenna Davison: I find it quite difficult to accept that the consultation with the DAs was overly limited. There has been quite a lot of correspondence and engagement between Ministers and the devolved Administrations but also an awful lot of engagement at official level. I know that Sue Gray in particular has been absolutely incredible in the engagement that she has been running through our Department.

Ultimately, the point of these funds is that they are allocated at a local level and that it is a UK-wide fund that is consistent UK wide. There probably always would be a little bit of tension in that regard between the devolved Administrations and the UK Government, but ultimately I think that the engagement that we have had has been constructive and positive. The end goal of this is that local people will benefit from local projects that will help improve their area. That is the thing that we really need to focus on.

Q248       Bob Blackman: Are you aware of any grants that have been given or bids that have been successful that impinge upon devolved policy, where the responsible Administration would turn around and say, “That is not something we agree with”?

Dehenna Davison: For the Levelling Up Fund itself and the bids that were submitted in the different geographic areas, the different devolved Administration areas, the UK Government sought advice from the devolved Administrations on those bids as part of the process to make sure that that engagement was there and that there was minimal risk of that possible overlap or any friction.

Q249       Bob Blackman: You are not aware of any areas where there is genuine, as you say, friction, devolved areas saying, “Hang on, wait a minute, we did not want this”?

Dehenna Davison: I certainly do not think any have come across my desk and, believe me, they would. If that tension had arisen, they would hit my desk.

Q250       Bob Blackman: One of the issues was that there was not a functioning Executive in Northern Ireland. We had a very strong evidence session with officials from Northern Ireland. It is obviously much more difficult for them because they were not necessarily getting policy direction from politicians, but there is an issue that the parameters set out were not compatible with section 75 of the Northern Ireland Act 1998. Can we just understand why that was the case?

Jessica Blakely: In the case of that concern, my understanding is that it was covered off by the public sector equality duty and that that was the reconciliation that was done. I don’t believe, certainly from my understanding, that that issue was something that we would agree with, but I am happy to take further information on it.

Q251       Bob Blackman: Have you had a chance to see the evidence that they gave us?

Jessica Blakely: No.

Bob Blackman: I think that it would be very helpful if you had a look at that because from our perspective they were making this quite clear to us. I think that it would be helpful to get a ministerial answer on that particular issue.

Dehenna Davison: I will take that away and, again, follow up in writing.

Q252       Bob Blackman: Thank you. Moving on to investment zones, last September the Government announced the proposals for investment zones. A number of those have used significant local government resources to bid, but we now understand that they have been scaled down quite significantly to only a few. Could we be clear how many investment zones there will be and when we will get a formal announcement on them?

Dehenna Davison: I cannot give you a specific on the numbers right now because that is a decision that is being made still, so I would not want to mislead you by giving that number at the moment. It will be—

Q253       Bob Blackman: Could you give us a clue as to when that decision will be made?

Dehenna Davison: It will be a much more limited number than I think the original policy, as outlined in September, will be. I believe we are expecting an announcement—

Q254       Bob Blackman: How much more limited?

Dehenna Davison: Quite a lot more limited, I think is fair to say.

Bob Blackman: More than one?

Dehenna Davison: I think that more than one is fair because it is still investment zones with an “s”, so that is probably a fair assumption. I will get more detail on that as soon as I can.

On the timing of an announcement, we are expecting something very, very soon. Again, I am sorry that I cannot give a specific date. There isn’t a specific date pencilled into the diary yet, but as soon as we have that further information I will, of course, make sure that the Committee is informed.

Q255       Bob Blackman: One of the concerns that I think is quite clear here is that a lot of local authorities will have invested substantial resources into bidding for these, to be frustrated. I understand completely that there are different views on bidding processes, but this seems to be potentially an enormous waste of public money. Would you not agree with that?

Dehenna Davison: I think it is a concern. The expression of interest process that was originally outlined for investment zones back in mid to late September was a much simpler process than some of the other bidding processes that we have seen. On the time and resource commitment from local authorities, hopefully that will be substantially less because it was an early expression of interest rather than a full business case. Certainly I understand why local authorities would be frustrated. Ultimately, with a new Government in place, things change and that is why the investment zone policy is being re-examined.

Bob Blackman: Okay. I will leave it there.

Q256       Mrs Natalie Elphicke: We have spoken in this session about the importance of transparency and criteria and making sure that the goalposts do not move after someone has put in a bid. I think that investment zones were particularly attractive to local authorities, certainly in areas like mine, because they offered the opportunity to work with the Department and others in getting a solution that is right for them, very much along the lines that Kate was saying. I appreciate that you are not in a position to announce the winners of the investment zones, those people who get special partnering, but what are the criteria for it?

Dehenna Davison: The current criteria are reduced. I think there is some stuff that has been said publicly around that. We are looking specifically at knowledge-intensive growth clusters, so looking at, for example, areas with strong university links or such knowledge bases. It is quite a different proposition from the one we had back in September. I don’t know if Jess wants to go into a bit more detail about the current criteria.

Jessica Blakely: It is very much a shift in policy. Where is the small number, as I think the Minister mentioned, at the centre of that, and what is the evidence for where Government intervention can be additive? That is around existing clusters of knowledge and different innovation elements. That is the evidence base that is being considered when assessing and working with individual authorities that may be the best existing clusters for generating that. The announcement that was made—I think it was at the autumn statement—was the delineation between the expression of interest process, which is not being carried forward, and there is a separate process that is now being carried forward in a much more limited way.

Q257       Mrs Natalie Elphicke: For those authorities like mine that had an investment zone proposition—very good, I might add—based around one set of criteria, is it fair on those authorities, which might also have knowledge or other hubs, that they are not allowed to rebid? You are not starting the process again on investment zones with the criteria open and transparent, and with proper competition. How is that fair on local authorities and areas?

Dehenna Davison: Once again, it unfortunately comes back to the point I made earlier about hindsight. If we had known the policy would develop in this way, clearly the process at the beginning would have been incredibly different. As the policy has changed with a change in Government, that is the position we are in.

Q258       Mrs Natalie Elphicke: Policies can change for all kinds of reasons. The question is whether the process should have been started afresh, given that this is new criteria for a new purpose with a new target. Wouldn’t the right thing have been to just set a new round for this so that all local authorities could put their best foot forward? Otherwise, I am sorry to say, it feels as if the decision has been taken about who the winners are and the goalposts moved accordingly.

Dehenna Davison: No decision has been taken as yet. I think that is a really important point to make.

Mrs Natalie Elphicke: I think that you said it was about to be announced, so clearly it has.

Dehenna Davison: Further detail about the investment zones policy is to be announced.

Jessica Blakely: Exactly, and back to what we were saying before, the Department is moving away from having competitive bidding processes, for all the reasons we have been going through. If we are talking about a very small, limited number, as we get into new processes that move away from competitive processes, that is part of what the Department is doing, as we have talked about.

Q259       Kate Hollern: They were announced in September and there were 38 named in the document. Lancashire was one of those 38. The document also stated that civil servants had been working with councils over a number of weeks to draw up a wish list for an investment zone. The 38 were tried, tested and ready to go, and now there is nothing. It is, “Well, we need to start again”. Again, there is a cost to local government in that, but there is also a very bad image of the process given to business leaders. A number of businesses had a number of roundtable meetings to talk about investment zones and what they would like. It appears to me that there have been big headlines that raised people’s hopes. They have been totally dismantled, with no consideration of the cost and effort that has gone in and, as Natalie says, we now have totally different criteria. It just seems madness.

Dehenna Davison: All I can do for local authorities that feel frustrated is to apologise. As I say, this is a new investment zones policy that is being pursued now, which we will be able to make a more formal announcement about soon. As soon as that is done, I will be able to provide more details to the Committee.

Q260       Mary Robinson: Briefly, the policy was about growth and stimulating growth via this investment. Is there a danger that if the new policy is to target and invest in areas that already have hubs and universities and so on, they would be quite capable of stimulating their own growth, whereas the areas where perhaps we could start to kick-start growth will be ignored because they do not have that infrastructure already in place?

Jessica Blakely: What I meant by existing was that the assets can be existing where there is a clear market failure, as we call it, where the market is not working in itself and there is a rationale for Government intervention. You may already have a university but maybe it is not generating the growth that it could be generating. You would not be able to demonstrate a good case for investing in an already very successful area. You would have to show that the Government funding and intervention was additional and was making a difference and overcoming barriers that were there in any case.

What we would not do, for example, is just pick an area at random and say, “Let’s make this a pharma hub”. You might try to find something where they have some local assets that lean towards that but they have barriers in the way, maybe around availability of local skills or investment or various other barriers where we could see that if we could fix that barrier we could unlock potential rather than starting something from scratch. It is definitely not investing Government money in already successful areas.

Dehenna Davison: Growth still is very much at the centre of that, for the reasons that Jess has just outlined.

Q261       Mary Robinson: Potentially, people may say that some of these universities that are not stimulating growth and so on are getting an awful lot of student funding going into them and they should be doing more on their own.

Dehenna Davison: I think that it is less about cash going into the universities and more about enabling the additional output that you can get from a cluster that specialises in a particular thing.

Q262       Chair: I am still not quite clear what is happening with investment zones, despite all that discussion. The bids that went in are not now going to be considered; is that right?

Dehenna Davison: Yes, this is new policy, as it were.

Q263       Chair: We are starting again but without competitive bidding, so there are not going to be bids submitted?

Dehenna Davison: Details about the investment zones policy are going to be coming very soon.

Q264       Chair: I thought that you said, Minister, that competitive bidding was not going to happen now for new projects?

Dehenna Davison: We are looking to reduce it for new projects. I am not saying it will be or won’t be competitive, I am just saying that we will be announcing more decisions around investment zones very soon. I am sorry not to be able to provide more clarity on that today.

Q265       Chair: I am still not clear. Either we are going to have a competitive bidding process on something afresh, or Ministers are just going to decide where the money goes.

Dehenna Davison: That decision has not been made yet, ultimately, on investment zones. That is why once we have that decision made and that announcement, we will be coming to you with it.

Q266       Chair: All right. I do not think that we are going to get any further today. We will all just scratch our heads and wonder what is happening.

On to the issue of economic growth. When Germany faced the massive challenge of reunification and it saw the disparities in productivity and GVA between east and west, it had a long-term plan to try to equalise those matters. I think it is true to say now that of all western European countries, we have the biggest inequality between our regions. We have had many efforts to address this over many years. I could make a party political point. If we go back to 2010, there have been numerous different funds and strategies and arrangements, but even before 2010 there have been as well. However, we still have these massive disparities, so nothing has really worked, has it? Is one of the problems that every few years we come up with a different solution and a different way of doing things and we never do anything for the long term?

Dehenna Davison: I think you are right in the sense of inequality. The OECD figures speak for themselves in the levels of regional disparity we have in the UK versus other comparable nations. I have made very clear since I became a Minister that we need to prioritise this and be tackling it.

On your question on the longer-term thinking versus smaller interventions, that ultimately is what the Levelling Up White Paper was all about. That is why there were those 12 longer-term missions set out up to 2030 to look at ways that we can level up. They are not all necessarily about regional disparities specifically in terms of north-south divide, but they are about improving opportunities, healthcare, transport and so on for places around the country that probably have not had access to the same level of opportunity and infrastructure. That is precisely why we set those out in the Levelling Up White Paper to try to provide longer-term thinking and longer-term policy direction. As you will know, Clive, if things change at the election, unfortunately it is the nature of politics that sometimes these things change.

Q267       Chair: It is, but it might be helpful if we could get some general agreement—maybe we can’t, maybe we can; Select Committees probably do it better than others—not just on long-term objectives. I think that generally the mission statements and the White Paper were welcomed, but it is about the mechanisms for achieving it. That is what the Germans did. They have done it cross-party and decided the mechanisms by which the east would be brought up to a similar level. They just went at it and carried on going at it, again with cross-party support. Is there no chance we can ever get there in this country?

Dehenna Davison: I think we definitely can for those longer-term aims. Quickly on Germany, I met with some officials and representatives from Germany, I think about two months ago, specifically to talk about levelling up in their country and how it has been working, not just in the context of unification but since, with deindustrialisation and what have you, which was fascinating. We are trying to take some international comparisons into account to look for best practice.

Ultimately, again I go back to the Levelling Up White Paper. As you say, it was broadly welcomed cross-party, which is always lovely to see, and not always something we see very often in Westminster. I think that is a really good starting point, certainly.

Q268       Chair: I take the point that elections sometimes get in the way of continuation. Nevertheless, despite one party being predominantly in Government since 2010, we have had an awful lot of changes, haven’t we, to the various mechanisms by which we are trying to reduce these disparities? Is the constant change something that mitigates against long-term planning and long-term achievement?

Dehenna Davison: I think that change for change’s sake is not, but this is why we are trying to provide clarity also through devolution deals, looking at, for example, the longer-term investment funds over a course of 30 years of guaranteed funding that those devolved areas know that they can draw upon. We are looking at broadening our devolution offer again to provide that longer-term certainty of powers, levers and funding. It is a complicated picture, as I am sure you on the Committee will know. It is difficult for me to talk pre-2019 since I only got here then, but since then certainly we have been trying to improve things and simplify. The work that I have been doing in the Department since September is to try to simplify.

Q269       Chair: I think the point was made that the levelling-up pot in the Department yearly is about £45 per head for spending. The Government spend about £15,000 per head. We have to get, haven’t we, the totality of Government spending focused on these objectives if that is what we want to see in removing or at least substantially reducing regional disparities?

Dehenna Davison: I think we do, and again that is why we set out those 12 missions in the White Paper. Some talked about pay and productivity. Some talked about transport—particularly, in the context of devolution, a London-style transport system elsewhere in, for example, Greater Manchester and the West Midlands. This has to be a cross-Government effort. That is why the Secretary of State has established the new inter-ministerial group to pull Government Departments together to make sure that we are focused on achieving these missions because they are so vital.

Q270       Mary Robinson: Very briefly, the Government talk a lot about left behind communities. These are clearly important because they could be rural communities in what many people think are affluent areas. Ultimately, the levelling-up agenda was one about addressing regional disparities and addressing the productivity gap that we have. If estimates are to be believed, just halving the productivity gap between the regions north and south could put £83 billion in GDP into the Exchequer. This surely should be the number one priority. Is the levelling-up agenda now committed to that priority?

Dehenna Davison: The levelling-up agenda is absolutely front and central at the heart of Government. I think that the Prime Minister has made that quite clear. I have been trying to bang the drum and reiterate that point ever since I was appointed. We are never going to level up the country if we do not fully address the productivity gap.

Chair: Minister, I thank you and your official very much for coming to give evidence to us today over a wide range of issues. There are still one or two things that you are going to come back to us with further information on, and one or two issues that you cannot quite tell us about yet because we are still waiting for the Government to decide on things like investment zones and what the direction of travel will be. Thank you very much for coming this afternoon. That brings us to the end of our public proceedings for today.