A report by the National Audit Office (NAO) has found that the government's policies to stimulate local economic growth are not consistently based on evidence of what interventions are likely to be most effective, increasing the risk that billions of pounds awarded to local bodies will not deliver the intended benefits.
The Department for Levelling Up, Housing and Communities (DLUHC), working with other government departments, has responsibility for "raising productivity and empowering places so that everyone across the country can benefit from levelling up".
As at November 2021, central government had committed £11 billion through policies to support the regeneration of towns and communities across the UK between 2020-21 and 2025-26, including £4.8 billion for the Levelling Up Fund, £2.6 billion for the UK Shared Prosperity Fund and £3.2 billion for the Towns Fund.
DLUHC has a limited understanding of what has worked well in previous local growth programmes due to a lack of consistent evaluation or monitoring. By failing to conduct evaluations, DLUHC has wasted opportunities to learn lessons to inform future interventions, and it does not know whether previous policies achieved their aims. Instead, it has built its evidence base for what works in local growth by drawing largely on external sources such as academic studies and evaluations conducted on place-based funding from the European Union.
Gareth Davies, the head of the NAO, said: "The Department for Levelling Up, Housing and Communities has not consistently evaluated its past interventions to stimulate local economies, so it doesn't know whether billions of pounds of public spending has had the impact intended.
With its focus on levelling up, it is vital that the Department puts robust evaluation arrangements in place for its new schemes to promote local growth."
The NAO found that DLUHC has not consistently applied knowledge and key policy principles from this evidence base. For example, the way the interventions work makes it hard for local authorities to plan the joined-up investment strategies that the Department's research suggests are needed to promote local growth.
DLUHC has received expert advice that major physical regeneration could significantly improve local economic outcomes, but the smaller-scale infrastructure investments it is funding through the Levelling Up Fund do not usually drive significant growth. DLUHC says it has intentionally designed the Levelling Up Fund to allow investment in small-scale infrastructure that improves everyday life as well as to support recovery and that major physical regeneration is largely funded through other routes.
Cllr Kevin Bentley, Chairman of the Local Government Association’s People and Places Board, said: “Investment in our places and people is key to supporting long term sustainable economic growth which brings increased prosperity to every part of the country.
“As this report highlights, awarding funding in small pots on a competitive basis has created uncertainty and hindered councils’ ability to plan strategically for their communities. The Government must do more to align new funding for economic infrastructure with local capacity, to deliver and co-ordinate long term interventions at scale.
“With adequate resources and freedoms, councils can continue to provide local solutions to the national challenges we face and ensure all of our communities are able to prosper in the future.”
The NAO report goes on to state that DLUHC, with HM Treasury's approval, did not produce all three standard stages of the business case process for the Levelling Up Fund, instead consolidating the stages into a single business case. While there may have been good reasons to move quickly, bypassing the earlier stages of a business case review limits the amount of scrutiny and independent challenge. The business case it did produce, and that HM Treasury approved, did not document the substantive comparison of alternative options for achieving ministerial aims as it should have.
DLUHC has committed to improve how it monitors and evaluates its most important local growth policies. This includes a new intention to evaluate one of its past interventions designed to stimulate local economic growth, the Local Growth Fund5, after previously saying it had no plans to do so. The Department has also made a promising start on monitoring and evaluating the Towns Fund. However, these plans are at an early stage, and there is significant further work needed to translate these good intentions into practical changes. DLUHC has also yet to make any progress on its commitment to an overarching local growth framework, with common metrics for evaluating local growth initiatives.
To ensure that future interventions achieve maximum impact, the NAO recommends that departments ensure they follow the guidance on developing and appraising business cases at key decision points, documenting how they have evaluated different alternatives to delivering a desired outcome. Government should coordinate the full range of its local growth programmes across Whitehall to manage dependencies between departments' work and avoid conflicting initiatives. DLUHC should also set out and publish how it intends to formally evaluate the Levelling Up Fund and the UK Shared Prosperity Fund.
