Oral evidence: Levelling up funding to local government, HC 424

Oral evidence, 15 January 2024.

Witnesses

Sarah Healey, Will Garton and Jess Blakely.

Chair

Welcome to the Public Accounts Committee on Monday 15 January 2024. Today, we are looking at levelling up funding to local government. Under the Government’s levelling-up programme, there have been a series of funds to provide additional support to councils to level up their area, boost the economy and boost employment. We have looked at the towns fund in detail in the past, and today we are looking at the various schemes all together. Thanks to the National Audit Office for its report, which pulls all the information together. We are keen to see how the £10.6 billion in the levelling-up funds is being delivered. So far, only £1 billion has been spent on local projects. There have been delays—some for obvious reasons, and others where we want to dig out why today. We want to be clear what money has been allocated, what money has been spent and what the plans are in the Department to make sure that levelling up is delivered and geographic inequality erased. We have as our witnesses the permanent secretary at the Department for Levelling Up, Housing and Communities, Sarah Healey. She is joined by Will Garton, who is the director general for levelling up, and by Jess Blakely, who is the director for major levelling-up programmes, so really very much at the frontline. A warm welcome to you all. Before we go into the main session, I want to bring in the deputy Chair, Sir Geoffrey Clifton-Brown, who has some important questions about flooding and local government.

Sir Geoffrey Clifton-Brown

Good afternoon, Ms Healey, and the other witnesses. I am sorry that you have not been given prior warning of this question, and I am perfectly happy if you write to the Committee on it, but you may be aware that the Committee had a recent hearing with DEFRA, mainly into flooding. Of course, flooding does overlap with planning, and I would ask that you perhaps consider one or two points. I ought perhaps to declare an interest as a chartered surveyor who has dealt with planning matters in the past. There is still quite a lot of building going on on the floodplain. Could we tighten up the procedure whereby any applications to build on the floodplain—and indeed in any areas that are known to flood locally on a regular basis—are notified to the Environment Agency, so that it can properly scrutinise them? I am still getting new houses built in my constituency without adequate mitigation, and they are flooding several years down the line, which is completely unacceptable. So point 1 is on the general liaison between the Environment Agency and the local planning authority. Point 2 is that you are in charge of implementing section 3 of the Flood and Water Management Act 2010. This is to do with the lead flood authority being able to enforce a number of matters to do with flooding, but I am particularly concerned about waste water and how SUDS are dealt with. Again, I am getting cases where SUDS are incorrectly installed by developers and houses flooding within a few years. I keep asking about section 3, both on the Floor of the House and in this Committee, and I keep getting told that there is Government agreement to take action, but nobody will tell me when. Of course, the longer it is delayed, the more chance there is of developers not installing proper SUDS systems, so could I ask that your Department look at that as a matter of priority?

Sarah Healey

Of course. The Department was working very closely with DEFRA and colleagues in the Environment Agency over Christmas and subsequently on the flooding that happened around the country. On those two specific policy points, I will get back to you.

Anne Marie Morris

Given the number of rather serious flooding events following the rainfall, the Government stepped in. On 6 January, there was an announcement setting up a fund for those who had exceptional flooding challenges. Some were for individuals, some were for local government and some were reductions in business rates, council tax and so on. It would be helpful to have an update on how that scheme is going and the extent to which it has been taken up. I appreciate that you will not have the detail with you today, but if you could write, that would be extremely helpful.

Sarah Healey

Of course, no problem.

Paula Barker

Welcome to our witnesses. I would like to touch on the levelling-up White Paper and the expectation around delivery responsibility for the UKSPF. Specifically looking at the Lancashire devolution deal—although this will, I am sure, be pertinent to other two-tier authorities—why are you proposing to give only an advisory role to the district councils in Lancashire in deciding the future of their UKSPF? Do you believe that that enables them to plan for the continuity of their projects? What assurance can you give district councils that they will not have a cliff edge in funding for any future rounds of UKSPF?

Will Garton

Good afternoon. As you will know, the UK shared prosperity fund replaces European funds. Those were previously done at many levels, including at the level of local economic partnerships. Ministers made a policy decision through the Levelling-up and Regeneration Act to create county combined authorities, such as we have done in Lancashire, and a subsequent policy decision to fund the UKSPF at that spatial geography. This will all be done in the next spending review, so there will be no changes to existing plans for districts in Lancashire that are receiving the UKSPF. The rationale behind it is really to cement the county combined authority. It also has control of the adult skills budget, as well as £20 million of capital to spend among the three constituent authorities. We completely understand that, in order for county combined authorities to be a success, districts must be involved. That is why there is provision for non-constituent members to be part of the board of said county combined authority. My experience, at least, of working with those authorities is that they understand that, not least because many of the powers that will make the whole endeavour a success are held at district level, so it is very important that districts are engaged from day one, and we get that.

Paula Barker

You mentioned that the UKSPF replaces EU structural funds, which were long-term funds, so when do you anticipate that councils will know the plans for the next round?

Will Garton

The next spending review.

Chair

That is due in November of this year.

Sarah Healey

We do not decide when the spending review is.

Chair

We believe—rumour has it, and the Whitehall word is—that it is November, which might be an interesting time for a spending review, so it may not be that date. Thank you very much for that, Mr Garton. That leads us nicely into the subject in front of us today. Again, thank you to the National Audit Office for its work on this area. I am going to ask Olivia Blake to kick off.

Olivia Blake

Ms Healey, why have there been delays to the planned final funding agreements and the transfer of the funds to local authorities? What has been the cause of those delays?

Sarah Healey

The NAO Report sets out quite a lot of the issues that have been experienced with delivery and the speed of delivery, which, as the Report says, have not always matched the expectations that the Department originally had for the speed at which we would wish this to have been delivered. The Chair set out at the beginning the numbers that were in the NAO Report as of March 2023 in terms of what had been spent. Spend is now quite a lot higher, and £1.5 billion has been spent since March 2023.

Chair

Is that an additional £1.5 billion?

Sarah Healey

Yes. We have now spent one third of the total allocated funds across the £10.6 billion.

Olivia Blake

Across all three?

Sarah Healey

Across all of the funds that were looked at in the Report. I would separate the issues into unusual, context-specific ones and the kinds of things that often bedevil capital projects and lead to spend happening more towards the end of a programme than at the beginning. We have seen that pattern absolutely in these programmes, as we tend to around Government. For instance, in the town deals programme, the first year saw £186 million spent, but three times that was spent in the most recent year, so spend does tend to have a profile where it goes up towards the end. This was particularly an issue with these funds, which, as you will know, were allocated over the last few years. In particular, construction inflation, which reached record levels of over 10% at one stage, changed the assumptions that local authorities had to make about what could be delivered with the amount of funding that they had in front of them, combined with the impact of supply chain delays on delivery, which meant that things took longer than people had originally hoped and planned for. Those were quite context-specific and really very important in causing the hold-ups in these particular sets of funds over the last few years. You will be familiar, from other investigations that the Committee has been involved in, with the kinds of things that cause delays with capital projects more generally. A lot of those have absolutely been seen with regard to this issue, such as issues on site condition that are discovered later on down the line with the programme. We have had some issues with utilities provision not being able to be secured quickly enough. We set out before Christmas how we are working with the Department for Energy Security and Net Zero on how to address those kinds of things with regard to freeports, and the same thing applies here. There have been issues with match funding falling through or being difficult to secure in difficult circumstances, and occasionally issues with buildings and land acquisition that require a bit of crunching through to get resolved. I would distinguish between the sorts of things that lead to delays in a lot of capital programmes and that are expected later down the line in a programme profile, and some particular issues that were experienced with these projects, considering the timing of when they were being delivered.

Olivia Blake

Specifically on the round 1 projects of the levelling-up fund, you have a deadline coming up very soon on 31 March, as shown in figure 7 on page 31 of the NAO Report. Can you assure us, given everything that you have just said, that these projects will be delivered as planned and on time?

Sarah Healey

We have done quite a lot of things, many of which, I am sure, we will cover in this hearing, to help facilitate faster delivery and support local authorities. One thing we look to do is offer some flexibility on deadlines, which is true with LUF round 1, which can extend to next March, and LUF round 2, to March 2026.

Olivia Blake

What proportion of projects are asking for those extensions?

Sarah Healey

I do not know.

Jess Blakely

We are currently working through each one and getting those returns through. We had our recent data monitoring of what part of the process they were going through. We have area teams that engage with each local authority. We are working off the monitoring data that we had in September to talk to them about what their delivery expectations are, how realistic the original delivery timescales are and in which cases they might need to extend those. It is a process that we are going through in real time at the moment.

Olivia Blake

Have you had many approvals for those extensions yet, or are you still very much in the work?

Jess Blakely

We are in the work at the moment. We are considering some live cases of projects that need further extensions, and that is something that we will need to consider in the round. It is a difficult tension to reconcile. As you will have seen on our future high streets fund, we can watch those. We have monitoring data, and I chair a number of boards where we take the quarterly and six-monthly reporting that we get on the delivery and the delivery timescales. In terms of the point at which you decide which ones need to be extended, and whether you do it across the board or on a case-by-case basis, you always have this tension of trying to make sure that you are holding people to delivery as quickly as possible, where that is possible, but also being mindful that that will not always be possible. Because round 1 is nearing that completion point, we are watching that really very carefully, and we are working with Ministers to provide advice in cases where that might be an issue.

Olivia Blake

Can you tell us when that proportion will crystallise, just to give the Committee an understanding of the true nature of the delay, if there is any?

Jess Blakely

Our latest monitoring returns came in in September. We are currently engaging with local areas on that, in live time, so it is hard to say exactly when that will be.

Olivia Blake

Before or after March?

Jess Blakely

Our process would then be to go to Ministers with advice on what the landscape looks like on the delivery profile and what the advice might be in relation to the number of options available at that point. When you make those calls, we have shown previously that we try to make sure that we prioritise delivery and that we extend where possible, but, ultimately, that is not for us to decide. It is a decision that goes to Ministers.

Olivia Blake

That is not very clear.

Sarah Healey

As soon as possible, obviously, because there is a deadline that people are looking at and they want to know about their extensions, so we are working through it at the moment and will put out advice as soon as we can.

Will Garton

In the vast majority of cases, it will be the right thing to do to extend, and we will do that. The predisposition is to extend, because it is the right thing to get value for money for the project that has already been invested in. It is not carte blanche, but we have a sensible and progressive attitude to extensions.

Chair

What is the Treasury’s position on this? How are you negotiating with them?

Will Garton

They would recognise that they would see this in the context of the overall departmental budget. The Department can take the risk that it goes into the following financial year and can manage that quite sensibly in the ordinary course of business. So I think they will be relaxed and supportive of an extension, not least because, if funds have already been committed, it would be poor value for money to then stop the whole thing. I would just assure you that we have a really sensible attitude towards this.

Sarah Healey

Nobody wants to see things left half-done. The process that Jess’s team go through is about determining what is required and not being in a situation where you just give a blanket extension, which, in the end, does not necessarily help to drive delivery towards a deadline.

Jess Blakely

Quite common in our projects is that the funding that we have provided is not the only funding source. Even though a project might extend beyond the deadline of our funding horizons, another factor that we need to consider is whether we can sequence the funding so that the funding that needs to be spent earlier is spent, and the match funding is spent later. It is very much case by case. Just because there are delays, that does not necessarily mean that funding from our funding sources needs to be extended.

Olivia Blake

Just to follow up quickly on the delays, a lot of what you talked through, Ms Healey, were quite predictable events or issues. Have the timeframes given for spending this money been adequate, given that you could have predicted some of this going wrong?

Sarah Healey

We could have predicted some of it, in the sense that a lot of capital projects experience delays from those kinds of issues. In any particular instance, it is quite difficult to predict it until you get further into delivery. As I said right at the outset, the NAO Report makes it clear that the speed of delivery has not matched our expectations. That is something that we always want to reflect on in how we set budgets over time. It is worth saying that, for instance, in terms of the funds that we had for the levelling-up fund in 2021-22, only 57% of the allocated budget was spent, but we are expecting this to be up to 83% in 2022-23, so we are getting closer to spending 100% of the allocated budget as the projects go through. The early years of this were very seriously affected by the inflationary and supply chain impacts of the pandemic, which were particular circumstances that were quite unusual and unpredictable.

Sir Geoffrey Clifton-Brown

Ms Blakely, are you aware from your evaluation programme, as a result of the information that you got in September, whether any project, because of the reasons that Ms Healey has already given, such as disruptions to the supply chain, increased costs and so on, is now undeliverable or such poor value for money that it should be scrapped? If so, what will happen to that money? Will it be reallocated in round 2 to other authorities?

Jess Blakely

There are definitely projects that have come forward to us saying that they will struggle with delivery timelines. The process that we are then going through with them is, as I have been describing, engaging with them through our area teams. These are locally based teams that know the local authorities across all of our funding sources. For example, there might be local authorities that have access to different funding pots—I think we will get on to the pathfinder pilot later. We talk about the ability to fund individual projects across different funding streams. We are also looking at whether there is anything that we can do to accelerate that delivery. There were 25 places where we have had a discovery team go in and work with the local authority on some of the problems that they have had, for example, in contracting or in giving their match funding providers confidence so that they can get that match funding in place. At the moment, we are working through all the things we can do, having had some of the monitoring returns coming through in real time. From September, we get the monitoring returns in, and now we are in that conversation phase, where we are working through with individual places how things look and what the delivery timeframes are. Based on all of that, we will be able to make a better assessment of whether we can sequence funding with private and public sector funding or whether there are different solutions that we can look at. We will then be looking at whether that assessment of the deadline being realistic is correct. That will then inform our advice to Ministers, which will then be a judgment call. We cannot really pre-empt what that decision will be and, while there are lots of options at those points, our main priority is to make sure that the projects are delivered where they can be, in a way that is fair and that balances all of these competing priorities.

Sarah Healey

Generally, the position taken if a local authority has struggled because of inflation is to rescope and look again at the project, which we want to work very closely with them on. You will be aware that we recently changed the way that those adjustment requests work. If they are up to 30% of a project, local authorities can self-certify to us that they are value for money and go ahead with those changes, so that, rather than abandoning or cancelling anything, we look at how it might be done differently.

Chair

From what you are saying, it is at Ministers’ desks that the decision is made whether to pull a project or not, ultimately.

Sarah Healey

We would never do that administratively. We would always allow that decision to be taken on the basis of advice.

Chair

It would be Ministers who would make the call on the basis of the advice. You did not quite address Sir Geoffrey’s question on what would happen to the money allocated to that project if you were to give advice that something was not viable and the Minister’s decision reflected that.

Jess Blakely

When money is not spent within a specific area, we have an agreement with Treasury. Not to bore everyone, but we have a reserve, for example, on the levelling-up fund that we draw down on when we need it. Those reserve calls are varied across the Department on different issues. There tend to be checks and balances.

Chair

Would that money go back into the reserve?

Jess Blakely

Yes.

Sarah Healey

LUF is reserve funding. We would just not draw down that funding. If we are talking about some of the other funds, it would then be an issue about whether it counted as a capital underspend, and we would then go through a normal capital underspend process, where we would advise Ministers about whether there were other options to spend it, in consultation with the Treasury.

Chair

So you would have to consult with the Treasury to reallocate it.

Sarah Healey

We would sometimes have to consult. It depends on the level.

Will Garton

This is hypothetical. In the vast majority of cases, if not all, the rescoping that Sarah mentioned would be the primary thing.

Chair

What I am driving at is that, ultimately, if you bid, even if you bid badly and get it wrong—and we will touch on some of those points later—you keep some money. I am paraphrasing massively, and you will give me all the caveats, but rescoping could mean that an authority that bid badly, did not do what it said it would and did not line up all the ducks will still keep some of the money. The message is that it is better to bid, even if you do not do it well.

Sarah Healey

I do not think that that is the case. First of all, we have several checks and balances in place to prevent that. For one thing, the project adjustment request means that they have to certify that the project remains value for money. These are section 151 officers who have proper statutory responsibilities on finances, so I would not suggest that they would do it in a way that was not value for money. The projects were all assessed originally when the bid was done, so it is very rarely done badly; it is rather that some things have arisen that have made things different in the future. On the overall point about what happens to the funding, we would address that on a global budget basis, in the way that we would with anything else. Once a project has been allocated funding on a reasonable basis, we would want to continue to try to deliver that project rather than pull funding, except in extremis.

Chair

We will touch on some of these areas in further questioning, but I will leave it for now and come back to it.

Ben Lake

Ms Healey, you mentioned at the outset that an additional £1.5 billion or so has been spent. Just for clarity, does that mean that the money has been allocated or that it has been spent by local authorities?

Sarah Healey

It means that the Department has given it to local authorities.

Ben Lake

Is it possible at all to know the spread of that £1.5 billion across the three funds?

Jess Blakely

We had a payment of £274 million from the levelling-up fund, £230 million from the future high streets fund, £573 million from the town deals and £566 million from the UK shared prosperity fund. We make quite big payments in six-monthly chunks, so which date you pick makes quite a big difference.

Ben Lake

Thank you. That is very useful. I just want to pick up on a few things that my colleague Ms Blake raised in terms of the delays that you have encountered and some of the requests for extensions to deadlines. Has it been possible yet to get a grasp of the main factors in, or causes of, requests for extensions of these deadlines?

Sarah Healey

Broadly, I would refer you back to my previous answer. There is a whole series of things that have arisen. Some of them are the context currently and the fact that the project has not been deliverable for the budget allocated through a particular fund, because of the nature of construction inflation in particular, as well as the nature of delays to obtaining materials through supply chains. There is also a long list of other reasons why, in particular areas, issues may have been experienced with delivering projects.

Ben Lake

Another aspect you mentioned that has an impact on project delivery is construction inflation. I know from my own local authority area that that has been a big concern and an issue. I would imagine that it is in the first round of the levelling up where you might have had the most requests for adjustments of the costs. Is it possible yet to know how many projects have asked for an increase in funding due to inflation? If so, how many have been successful in getting extra money?

Jess Blakely

The way that the levelling-up fund and the project adjustment request process work is that they have the allocated amount of money, and then they rescope the project to still fit with that same amount of money. You tend to find that the project adjustment requests that we get through are a change in how the project is going to be delivered. Quite often, they might value-engineer the project. We provide them with capacity and capability support to do that. That tends to be the route that people go down. There is not a process for them to request additional funding.

Sarah Healey

We do not have any more money to deliver on the basis of construction inflation, so we have to live within the amounts that we were originally allocated. The question is how the project can continue to be delivered within the amount of money that the Department globally has and that individual projects have been allocated.

Ben Lake

As you rightly pointed out, construction inflation was quite significant and extraordinary, so an outsider might question how it is possible at all to deliver the promise of the initial project, given that it was properly and thoroughly scrutinised by you, and to continue to deliver the same level of benefit. Is it realistic to assume that we will not be able to deliver the full range of benefits of the original schemes and that we need to be quite clear about that?

Sarah Healey

In a sense, this is the process that I described earlier, which is that we have a process on project adjustment requests. We confirm that the project is still value for money and that, therefore, it is still delivering benefits. It is a rescoped project in some cases, but that has not been consistently necessary across the board. In the vast majority of cases, we would see very similar delivery to that that was intended at the beginning. It has just been difficult to do it in the same timescale.

Ben Lake

On that point, would I be correct to assume that many of the projects that have so far asked for a rescoping, or indeed an extension to the timelines, are ones that fall in the first round of the levelling-up fund?

Jess Blakely

Where we are in delivery, the levelling-up round 1s are the ones that are in that phase. During the last few months, we have been onboarding levelling-up round 2, and round 3 has only just been announced.

Ben Lake

Would it also be right for me to assume that, for the second round, given that it was a year later and we knew a little bit more about inflation, the hope is that we will not have as many projects coming forward wanting to adjust their costings and having to rescope?

Jess Blakely

That would be the expectation.

Ben Lake

That is a reasonable assumption to make.

Jess Blakely

Yes.

Peter Grant

Good afternoon. Could I follow up on that, Ms Healey? You gave quite a detailed answer earlier about a lot of the reasons why so many projects are not happening as quickly as we might have hoped. For some of the earlier allocations, with the exception of the escalation of the war in Ukraine, none of the other factors that you mentioned should have come as a surprise in June 2021, when the first round of levelling-up funding was awarded. How have we managed to get the timescales so wrong with rounds 1 and 2?

Sarah Healey

I do not have a tremendous amount to add to what I said before. The ongoing impact of supply chain issues and delays has been problematic for local authorities to manage. The impact of inflation continued to be very high. It is also not unusual in capital projects for issues that were not necessarily predictable at the time when a project was put together to emerge later on, and for some of the same systemic issues that have been affecting those projects to also affect, for instance, those who are match funding, where that has been an issue for delivery.

Peter Grant

The NAO Report has mentioned some bids that, for example, did not have planning permission, compulsory purchase powers approved or a feasibility study. When you get a bid like that for a fund that, in most cases, has to be spent within about 18 to 24 months, does that not ring alarm bells with you that local authorities are, effectively, being forced to bid for projects that do not meet the achievability criteria that you have set?

Sarah Healey

As we will probably get on to with questioning from some of your colleagues later, there is a balance here between asking local authorities to have every single aspect of a project ready to go at the point where they bid for funds, which means that there is extra cost on the local authority and extra capacity that the local authority needs to devote to this when it has no certainty of funding, and our desire to have projects as deliverable as possible within the timescale available. In some of the instances that you talk about, we have looked at deliverability as one of the criteria that we have assessed, but it is not the only thing, and we would not refuse to approve a project that did not yet have planning permission, because that might exclude a local authority that has not yet been able to bring that up front. We have to have a balance between whether we are expecting all of that cost to be borne by local authorities before they bid and before they have any certainty, and whether some of it can wait until later.

Peter Grant

The total amount allocated in round 1 levelling up was £1.75 billion. That was originally all supposed to be spent within about 10 weeks from now, by the end of March 2024. How much has been spent by local authorities on that particular allocation?

Jess Blakely

In terms of the numbers year by year, the LUF spend in 2021-22, as of March, was £83 million. Is that the number that you were looking for?

Sarah Healey

We wanted the amount of LUF round 1 funding that has been spent.

Chair

LUF is the levelling-up fund, just in case people are wondering.

Jess Blakely

Year 1 of round 1, rather than round 1 specifically.

Peter Grant

Levelling-up fund round 1 was allocated on the basis that it would all be spent by the end of March this year. Do you know how much local authorities have spent of that £1.7 billion, how much they expect to have spent by then, and how many are going to come back to you and ask for an extension of time?

Jess Blakely

The way that we look at it, as for all of our funds, and the way that we run our governance, monitoring and reporting, is across all of the three funding streams.

Sarah Healey

It is not separated out, so I assume that we could find that out.

Will Garton

We could do that. I do not know if we have it right at our fingertips, but we could definitely do it.

Sarah Healey

We are very happy to follow up for you.

Peter Grant

What is the deadline for projects in levelling-up round 3, which was announced in November last year?

Sarah Healey

March 2026.

Peter Grant

So you did not think about extending the timetable for those projects, given that the timescales for rounds 1 and 2 have proven to be unrealistic.

Sarah Healey

At the moment, we want to stick with the deadline that was set out for the spending of those funds, but we will keep that under review as we see how delivery is progressing.

Peter Grant

Some authorities had bids that they might have wanted to submit for round 2 but decided not to, because they did not think that they could achieve them within the round 2 timetable. They could have achieved it within the round 3 timetable, but they did not get a chance to bid, because round 3 was announced without any bidding. Do you understand how those authorities are going to feel if they discover that other authorities that put in equally unlikely bids for round 2 are now being given an extension, and others that put in unachievable bids for round 2 have been given the allocation with an extra year to achieve it? That does not seem very fair, does it?

Sarah Healey

There is always a set of different considerations that we have to take into account when deciding how to allocate funding. With regard to LUF round 3, we were listening very carefully to the feedback that we had had that competitions required quite significant extra effort from local authorities in order to put in bids, and we felt that it was more appropriate, considering the costs already incurred, to use an allocative approach. That will have had consequences for some authorities but, at the same time, Ministers ultimately took the view that, on balance, that was the better way to go forward.

Peter Grant

I may want to come back to the monitoring of progress on individual projects, but I will leave that until later in the session.

Sarah Owen

I am going to pick up where my colleague Peter left off. I have three planned questions—one to Ms Healey first, then one to Mr Garton and one to Ms Blakely. Some of the reasons given in your earlier answer for delays were land acquisition, site conditions and utilities. My colleague Peter tried to get to the bottom of that, in that these are issues that should have been identified in the bidding process. What has been improved in the bidding process, and how can you assure us that this will not happen again with all the round 3 bids and projects, so that we ensure that they will be delivered on time?

Sarah Healey

The round 3 allocation was to bids that were submitted in levelling-up round 2, so we did not change the delivery criteria for that. I cannot give you any assurance that there will be no delivery issues encountered with the projects that we have funded in round 3, because it is inevitable with capital projects that some of these issues arise. We would hope that the systemic, significant and big issues that were experienced with some of the earlier projects, as discussed, and particularly those around inflation and supply chains, will be less of an issue for the round 3 projects.

Sarah Owen

When you say that you hope that there will be less of an issue for the round 3 projects, is that because the Government have given local authorities specific support or guidance on this, or is this a hope?

Sarah Healey

The situation is simply one that has stabilised since then. For instance, some of the supply chain situation has stabilised since then, so we would not expect it to continue to have such a critical impact on delivery as it has had in the past. Specifically on support given to local authorities, I would just point to two things, one that Jess has already mentioned and one that we have not. One is the discovery team that the Department has working closely with individual local authorities where there is a risk of slippage to try to unblock those issues and ensure that they have been addressed early on, and working with other Government Departments or other agencies to try to deal with some of the issues that have arisen in those specific circumstances. The other is a contract that we have let for delivery associates to work with local areas in order to speed up delivery and assist local authorities that may be experiencing some problems with the delivery of their projects.

Sarah Owen

Mr Garton, lots of the reasons given for delays were external factors or very much dependent on local authorities. Paragraph 9 in the NAO Report specifies, “Local authorities’ projects were held up due to delayed funding announcements to local authorities. DLUHC made several funding announcements across the funds later than planned and many local authorities delayed starting work as a result.” Could you tell us the proportion of those that were delayed as a result of DLUHC delayed funding rather than external factors, as highlighted by Ms Healey?

Will Garton

I do not have a number at my fingertips. I am sure that we could try to find a way to calculate that. While there were some administrative delays in the Department, they are small compared to the overall macro environment that Sarah has described. I am happy to get back with an assessment of apportionment, but I do not have it at my fingertips.

Sarah Owen

That would be really helpful. Thank you. In terms of identifying hold-ups within central Government, are there any Departments that DLUHC has found particularly unhelpful in delivering these funds?

Will Garton

No. You might not believe it, but the levelling-up fund is a really good example of collaborative working, not least because the Department for Transport, the Treasury and the Department for Culture, Media and Sport are heavily invested in it. It has been a really good experience. It is a joint decision-making framework. One of the great learnings from it that we should try to take forward into the next spending review is that, instead of seeing it in terms of departmental silos and budgets, we have assessed projects through a bottom-up, place-based lens, and all the Departments that have contributed to it have done so not only with a departmental lens but with a place lens, which is quite encouraging.

Sarah Owen

That last point around collaboration is really good to hear. Last year, it was announced that the Treasury was signing off on capital spend for DLUHC. Is that still the case, or when did that stop?

Sarah Healey

The Department’s delegated capital limits have not been restored to their previous level.

Sarah Owen

Ms Blakely, on one of our graphs we have a number of projects, in both the levelling-up and towns funds, that are under way. What constitutes “under way”? It may mean something very different to you than it does to another Department.

Jess Blakely

“Under way” does not necessarily mean that work has started on the construction site. It could be planning permission or feasibility studies, but we are starting to spend money on the things required for project delivery.

Sarah Owen

Would it be possible to give the Committee that information, so that we have a better understanding of how far these projects are under way? A feasibility study is not very under way.

Sarah Healey

We are very happy to share the information that we have. We would be very reluctant to go out to local authorities to ask for extra information, because one of the things that we are very keen not to do is to place extra burdens on them. We can let you know what is meant by the definition in the funding guidance, but I would be very reluctant to ask them for more information.

Chair

As a reference for anyone who is following this, that is figure 6 on page 29.

Anne Marie Morris

Turning to figure 6 on page 29, which is on the towns fund and the future high streets fund, we have 19 projects that have been paused. That is, relatively speaking, quite a significant number. In none of the other streams—town deals or levelling up—do we have the same number. Has there been, in hindsight, too much pausing and perhaps too much lenience, which is why we have now had so many that are still under way rather than heading toward the deadline? Have you adjusted how you operate that pausing to try to reduce that? What would happen if a high streets fund project came to you today, with your deadline now of September 2024, and said, “Can we pause again?” What would your approach be?

Jess Blakely

On the future high streets fund, we have extended the deadline, which has definitely dealt with the fact that some of the places need a bit more time.

Anne Marie Morris

To September 2024 or any further?

Jess Blakely

That is the extension. Talking about the towns fund specifically and the processes that they would go through to pause something, we have not changed anything in relation to that. That is some of the flexibility that we try to give local places. We talked about the way that we spend money previously within central Government, whether it is central Government spend or local authority spend. We are not allowed to spend the money ahead of need, so we need to, first, assess whether that local authority is able to spend that money in that financial year. We have a process that we go through to do that and have not changed any of that, and that is not a flexibility that we are considering taking away. If the project has paused, that has not necessarily meant that that is the reason why it might not hit the deadline. We would still be assessing, as we have been doing, and getting in the monitoring returns, speaking to the local areas through our areas teams, and then assessing how they are doing in terms of delivery and how that project should be progressed. None of that has changed. In direct answer to your question, we have not changed the pausing process.

Anne Marie Morris

Can we limit ourselves to the future high streets fund, not the towns fund? In theory, as I understand it, that can still have projects paused, if a local authority comes to you and says, “We would like it paused.” Given that your deadline, although it has been extended, would still be difficult to reach, if you had accepted a pause, would you still accept a pause?

Sarah Healey

It would wholly depend on the circumstances and the reason for the pause. We would not say to a local area, “You cannot pause. You have an extremely good reason to pause if it is temporarily.” This is 19 projects out of roughly 500. We would look at each instance of this, but I do not think that we would refuse to talk to a local area about the particular circumstances that it was experiencing if it came to us and said that.

Anne Marie Morris

Presumably, in each case, they would still have to prove that. Whatever the pause was, either they would have to self-certify or you would have to ensure that, if it was more than 30%, the pause would keep value for money.

Sarah Healey

That is if they came to us wanting to adjust the project.

Anne Marie Morris

Thank you. That is really helpful. We have discussed the assorted reasons why people come to you for a pause, of which reconfiguring is one, and others include, “We cannot get hold of the skill,” “The costs have gone up” and so on. For many of these projects, because of the timing of the future high streets fund, the consultation process took place during covid. Have you come across any circumstances where communities have now said, after the consultation has completed, “We were not properly consulted, and that is why we would like the thing paused”?

Sarah Healey

No, not that we are aware of.

Anne Marie Morris

Presumably because that would not pass the value for money test anyway. Do you see what I mean?

Sarah Healey

It is not something that we have come across or that any of us is aware of.

Sir Geoffrey Clifton-Brown

The NAO tells us in appendix 1 that it stopped collecting its evidence in March 2023. Paragraph 10 says: “As at March 2023, 50% of main construction contracts for levelling up fund round 1 projects, due by March 2024, were unsigned. This was also the case for 85% of levelling up fund round 2 projects, due by March 2025.” Can you give us an update on those figures?

Sarah Healey

Do you want to read them out, Jess?

Jess Blakely

As of now, for LUF combined, 284 out of the 308 have been commenced. For the future high streets fund, it is 185 out of the 242. For the town deals, it is 488 out of the 604. Those are the latest numbers.

Sir Geoffrey Clifton-Brown

That is very helpful. Given that fairly precise information, I find it slightly odd that you do not know, two or three months on from your evaluation of the evidence in September, how many funds have asked for an extension.

Jess Blakely

It is not a formal process where they ask for an extension. It is much more of a conversation. As I said before, some places have come forward to us and said, “We are finding these delivery challenges,” and we have started engaging and having a conversation with them. It is not that they fill out a form and say, “We want an extension.” It is much more organic than that.

Sarah Healey

It is more that a conversation comes out of a monitoring return being submitted to us, and then we have engagement with the local authority, rather than, “Your deadline to submit an extension request is September.”

Will Garton

Just to be totally clear, projects now understand that, in the levelling-up fund, we have allowed an extension until March next year. That is clear to them. If I was a project with some delays, I would know that the Government are offering that flexibility and that I have enough cover to get on with it without submitting a formal request as such.

Sir Geoffrey Clifton-Brown

If they know that they are not going to meet the March deadline next year, they should have already asked you for an extension, should they not?

Sarah Healey

For LUF round 1, yes.

Jess Blakely

Yes, for very exceptional circumstances, and those are the conversations that we are having. The point that I am getting to is that the monitoring returns are across a number of areas. We are starting to engage with people on how they are going to meet the delivery timelines. It is a back-and-forth conversation, where we try to get to the bottom of it. For example, a lot of the flexibilities are delegated. They can move money in between years, even now, just before coming back to DLUHC for that. There are just a lot of facets to it.

Sarah Healey

It is less absolutist than an application for an extension and a “yes” or “no.” It is more of an ongoing engagement.

Sir Geoffrey Clifton-Brown

I have listened to your answers very carefully, but you must be able to tell us how many extensions you have definitely agreed so far.

Jess Blakely

We have not agreed any extensions beyond—

Sarah Healey

Beyond the blanket one.

Jess Blakely

Exactly.

Sir Geoffrey Clifton-Brown

How many conversations are you having? How many are in the mix, as it were?

Jess Blakely

I would have to get the exact number of conversations that we are having. We have different buckets of categories. We have gone through the process of monitoring returns. We have buckets that we think need more interventions. There are 25 places that we have spoken to with our discovery team. Those are specific ones that we do not even think are necessarily in the most trouble, but where we think we could make the most difference and move that delivery along.

Sarah Healey

The point is that we are in dialogue with all of the local areas that are involved in the delivery of these projects, understanding where they are up to, understanding what is getting in the way, if something is, and understanding what their next plans are. We are constantly in dialogue and get monitoring returns from all the projects.

Sir Geoffrey Clifton-Brown

Surely, a local authority that is halfway competent will know by now whether it is going to be able to deliver on time by March next year.

Jess Blakely

We sent them a letter before Christmas, where we asked them to come forward with delivery issues and specific timelines. Those are the conversations that we are having currently.

Will Garton

We expect them to do it by March next year in LUF 1. That is the policy.

Jess Blakely

We are going through the process of having those conversations, wrapping that up into some advice and then making a decision.

Sir Geoffrey Clifton-Brown

Could I take you to paragraph 6 on page 7? It states: “Local authorities and other bodies submitted 834 bids across both rounds of the levelling up fund, the most recent of the competitive funds. Of these, 216 bids were successful with a value of £3.78 billion and 618, just under three-quarters, were rejected, with a value of £9.74 billion.” It does seem to me that an awful lot of public money is being wasted on bids that were not successful. I just wonder whether the process could not be tightened up a bit in future, so that you give them better guidance as to the type of bids that are likely to be accepted. It seems to me that, in that process, there must have been a lot of bids that were never going to be successful.

Sarah Healey

We have already reflected, in answer to previous questions, the fact that we have adjusted our approach to bidding, precisely because of the feedback that we received about the extent to which local authorities were investing large amounts of money in producing bids. There was clearly frustration when not all of them could be successful. We looked to improve the guidance that was available for local authorities in advance of bidding, but we have also taken the feedback that a competitive approach can place quite a lot of burdens on local authorities. While we can see some advantages to competitions in driving value for money, as the Secretary of State said, you can have too much of a good thing. A variety of approaches, including more allocative ones, can avoid precisely some of those issues that you have raised.

Paula Barker

I am asking for clarity, because the monitoring and evaluation side appears to be quite woolly. How often do the monitoring returns have to go in to you? Once a project is delivered and there is an end date, do you have any monitoring and evaluation post that to ensure that outputs and outcomes are delivered?

Will Garton

I will try to answer your question in two phases. First, we have regular data returns from all our projects. In answer to your question specifically, they are normally quarterly or half-yearly, so we have an absolute ton of data. Some of the feedback that we have had from local authorities is that we collect too much. We are collecting 400 indicators across 13 funds, which is too many. We could reduce burdens on local authorities, and we plan to rationalise some of that data collection during this year. We definitely have really good information about what is going on in projects. Separately, we have commissioned and are in the process of undertaking proper, Magenta Book, thorough impact, VFM and process evaluations that are done externally to the highest possible standards, which will give us the best assessment that we can gather of the success or otherwise of the funds. We have both things.

Paula Barker

When you receive the bids and you are assessing them, is any consideration given to areas of higher deprivation, for example, and what the project delivery would save in other areas, as opposed to an area of higher affluence?

Will Garton

The direct answer to your question is that there is. In the long-term plan for towns recently, which is an announcement that the Prime Minister made towards the end of last year, we did that by looking at a series of metrics of need. We looked at pay and productivity, skills levels and health inequalities. We used the index of multiple deprivation to try to understand where need is most prominent. Although we are trying to, it is harder to empirically calculate knock-on savings to welfare, health outcomes and the like. There is some room to do that in the Green Book through a wellbeing measure. To get to the standards where it is accepted empirically and statistically is difficult, but it is something that we are tackling, because we think that that can help us target our interventions even more successfully.

Sir Geoffrey Clifton-Brown

Ms Healey, I want to ask you about your evaluation process on all the funds. I am having a little difficulty asking questions about the effectiveness of evaluation when you cannot even tell us today how many funds in the levelling-up fund have asked for an extension. It does not seem to be a very difficult question.

Sarah Healey

It is just a mismatch between how you think we take this information from local authorities and how it actually works. It is more of a dialogue than a set of data returns where they tick, “We would like an extension.” We look at progress made. We understand what is happening. We might make a different intervention if we think that slippage is possible. That is not the same as a local authority coming and asking for an extension in a very bald way. That is all that is going on here. We do not have a box-ticking exercise where they send us a note asking for an extension. That is why it is not binary in that sense.

Sir Geoffrey Clifton-Brown

Could you send us a note? I am dissatisfied with the answer, I have to tell you, and I do not think that I am the only person on the Committee who is. How many have asked for an extension as of this moment in time, and how many do you think have reasonably good grounds to ask you for an extension? It is about transparency.

Sarah Healey

It is a matter of judgment. I would just emphasise that we are still in dialogue with areas about whether we think that the issues they are raising may result in an extension being required. That may or may not count as them having asked for an extension. We will do our very best to let you know as much as possible.

Sir Geoffrey Clifton-Brown

You put the caveats on if you want, Ms Healey. We may well come back to you.

Chair

They all have a blanket extension until March 2025.

Sarah Healey

They all have a blanket extension until March next year anyway.

Chair

Is that not a sign that there was a problem with how it was set up?

Sarah Healey

We have already discussed the reasons for delays and the fact that the amounts that we are now spending are much more closely allied to the budgets that were set for those years than they were in the early years, where we experienced a lot of those issues.

Chair

I am glad that you acknowledge that again.

Mr Francois

Good afternoon. These programmes have been running for several years. In toto, between the different funds, we are talking about, in round terms, £10 billion of British taxpayers’ money. Very little of this has been spent. This is not about management speak, and conversations and dialogues. It is about delivering change. What change on the ground has been delivered, Ms Healey?

Will Garton

Shall I take that?

Mr Francois

No, the permanent secretary.

Sarah Healey

Yes, of course.

Mr Francois

What actual change at ground level, despite all this endless talk, has happened?

Sarah Healey

Some projects have been completed. Where those projects have been completed, they are making a difference in those local areas.

Mr Francois

Can you give us three practical examples of what good looks like?

Will Garton

In Blyth, we have been working really closely, not just on funds, because that is only part of our armoury. There is £73 million from the future high streets fund. There is a levelling-up partnership and there are long-term plans for towns investment. The Department for Energy Security and Net Zero has extended the renewable energy catapult.

Mr Francois

What is the renewable energy catapult?

Will Garton

It is a centre that tries to take advantage of the opportunities that clean green energy presents on the north-east coast, both technologically and by training people.

Mr Francois

So it has built a centre.

Will Garton

There is already a centre, but its lifespan and funding have been extended by the Department for Energy Security and Net Zero. What have we done? We have come in and funded additional equipment and support for the FE college so that students can study courses relevant to the green energy opportunities in the area.

Mr Francois

We are giving some money to an FE college that is related to green energy.

Will Garton

Yes.

Mr Francois

Okay, I have got that. Can I have two more, please?

Will Garton

Blackpool has received funding from the towns fund, the levelling-up fund, capital regeneration projects funding, the local growth fund and the building fund. It is also benefiting from the Lancashire devolution deal, which we discussed previously. You might not agree with that, I know, but that is our position. We are supporting the local authority in door-to-door enforcement of private rented sector quality standards because one of the biggest issues in Blackpool is the quality of housing. We are funding HM courts service to move the court building out of the town centre in order to do a town centre redevelopment.

Mr Francois

We are doing some door-to-door checking on landlords and we are moving a court building.

Sarah Healey

These projects are inevitably small-scale. They are meant to make a difference in places.

Mr Francois

With respect, Ms Healey, this is kind of my point. For £10 billion, they are pretty small-scale.

Sarah Healey

We have only got to two.

Mr Francois

Yes, can we have a third one, please, even a medium-scale one?

Will Garton

In Sandwell, which is a recipient of the levelling-up fund, the towns fund and the UK shared prosperity fund, we have conducted what we call a levelling-up partnership. That is a partnership with the local authority. Very specifically, there is the extension of the tram from Wednesbury to Brierley Hill. It is a big interchange. The connectivity to Birmingham presents massive opportunities for Sandwell, but there is not enough high-quality housing to take advantage of that opportunity, so we are funding additional housing as part of the levelling-up partnership in Sandwell. Sandwell is also benefiting from the trailblazer devolution deal that we signed with Andy Street, which comes with a whole host of—

Mr Francois

Have you actually extended the tram line?

Will Garton

We have funded the Mayor of the West Midlands to extend it, yes.

Mr Francois

When will it be extended?

Will Garton

I cannot give you an exact timetable for that.

Mr Francois

It has not happened yet. Forgive me. There is never enough time in these meetings—that is the nature of the beast. I have to say that you are not exactly blowing the Committee’s socks off with these examples. My own county of Essex did not get any money out of the levelling-up fund in round 1 or round 2. We will not dwell on that, but it did not. It got some of the towns fund, to be fair. According to its own figures, Essex County Council has £140 million of section 106 commitments that it has not yet spent. Essex is one of the biggest counties in the country. If that is representative, and you pro rata that across all of England and Wales, you are now talking about several billion pounds of resource that is yet to be deployed. Have you looked at the possibility of trying to use some section 106 moneys with some of the levelling-up fund and towns fund in order to accelerate delivery? If there is £140 million going begging in Essex, there must be several billions across the country. Has anyone looked at that, Ms Healey?

Sarah Healey

The delays in delivery are not associated with a lack of funding. We are funding individual projects that were bid for and that are specifically intended to be projects that local areas have identified as critical to the future of their area. To give you an example, I was in Barnsley on Thursday last week. I met the director of the Barnsley Youth Choir, who showed us the building that is going to be the new headquarters for its vocal education centre. The Barnsley Youth Choir is an amazing choir, and 9,000 young people in Barnsley participate in it every year. It currently does not have a home in which to do rehearsals and which all the different partners it works with across Europe can come to do masterclasses and other kinds of events. That is something Barnsley as a local area asked for funding for.

Mr Francois

When does this new building open?

Sarah Healey

If we had read it out in the previous list, I am sure it might not have sounded like a lot, but to Barnsley Youth Choir it is quite significant.

Mr Francois

I am not decrying Barnsley Youth Choir for a moment. I am sure it is excellent. We all have some good choirs in our constituencies and we do not need to reel them all off. We appreciate the value of community choirs. When will this new building for the Barnsley Youth Choir go live?

Sarah Healey

It is currently going through a planning permission process, and work will get under way shortly.

Mr Francois

It will take, what, two years?

Sarah Healey

We have already covered the fact that the deadline for these projects is in March 2026. If it happened in two years, that would be within the timescale.

Mr Francois

Ms Healey, the point I am trying to make—and then I will hand back to the Chair, because I do not want to hammer the nail to split the wood—is that you have had several years on these projects, and part of the Committee’s frustration, dare I use that word, is that the vast majority are taking a very long while. A great deal of money has been spent, and I am sure a large number of consultants have done extremely well out of it, but in terms of what has been delivered in the real world at ground level, is it not pretty thin gruel, Ms Healey?

Sarah Healey

We have set out already that, increasingly, we are meeting the budgets that are set. That is an indication of projects being advanced through the process of delivery, and therefore delivery will continue to accelerate over the course of the next couple of years.

Mr Francois

Not much so far, then.

Sarah Healey

We have been clear about what projects have been completed. With capital projects, it is often the case that delivery accelerates towards the end of the period.

Mr Francois

In fairness, you have given us three examples, all of which will be important in their localities.

Sarah Healey

It is often the case that project delivery accelerates towards the end of the period. We think that that is highly likely to happen and, indeed, all of the indications, considering our spending to budget, are that that is exactly what is happening here.

Mr Francois

This is all taking far too long.

Will Garton

I acknowledge that, compared to the profiles originally set out at the time of the spending review, we are behind where we wanted to be. As Sarah has articulated, a lot of that is due to the pandemic and the consequences of inflation subsequently. That may sound like an excuse to you, but it has real-world impacts. Mr Grant talked about the impacts in June 2021. Inflation peaked later than that. Since then, however, it is important to recognise that, across the future high streets fund and the towns fund in particular, we spent 100% or more of the budget that we allocated last year.

Mr Francois

Mr Garton, we went into lockdown in March 2020. We are now in January 2024. The civil service cannot continue to use the pandemic as the catch-all excuse for everything.

Chair

Let Mr Garton finish, Mr Francois.

Will Garton

For the last financial year, for the future high streets fund, we spent 100% of the budget. For the town deals, we spent 101% of the budget. This year we think we are going to spend 96% of the future high streets fund budget and 103% of town deals. Last year, we spent 100% of the UKSPF budget. This year we think we are going to spend 97%. We are now getting money out the door.

Mr Francois

Yes, but I am saying that there is a disparity between when you say the money has been spent—in other words, it has been committed—and when something has actually happened with that money.

Sarah Healey

No, we would not spend the money unless there was a reason why local authorities were saying they needed the money. We do not spend money in advance of need.

Mr Francois

I understand—

Chair

Mr Francois, that is not the point that is being made.

Mr Francois

I do not want to get into a debate about semantics, but you are saying, “It is spent,” and I am saying, “But it is not open yet.”

Sarah Healey

It is not a semantic debate. When we spend money, it is because local authorities have shown us that they need the money.

Chair

We are talking at cross purposes here, Ms Healey. It is really clear. For our constituents, when something is on the ground and they can put a key in the door and go to choir practice, walk into their new home or get on the tram, that is when something has been spent and delivered. That is the difference.

Mr Francois

Yes, not when it has been moved from one column to another in a departmental spreadsheet.

Sarah Healey

All I would say is that that is an indication that projects are being delivered.

Chair

They are progressing.

Sarah Healey

Yes.

Mr Francois

The point has been made, Dame Meg.

Olivia Blake

Mr Garton, can you explain how many places have taken advantage of the flexibility to amend the projects by 30% and how many of these revisions have resulted in a reduction in the scope of that project?

Will Garton

I cannot tell you how many projects have taken advantage of the more flexible approach, because they do not have to contact us any more. That is part of the flexible approach. We deliberately do not collect that data, because we are trying to empower local authorities. What I can tell you, which is our best estimate of the answer, is that project adjustment requests are down by about a third since we made the change after the summer.

Olivia Blake

Do you think the public will be sympathetic to any down-scoping of projects?

Will Garton

I would be nervous about trying to conject what the public might think.

Chair

That is very wise, Mr Garton.

Sarah Healey

In every area.

Will Garton

That is not really for me to do, but we have a difficult balance to strike between changes in cost, cost overruns and some of the difficulties that we have described, and the need to get projects moving quickly. Those are both pressures on us. The public would want us to work closely with local authorities to come up with a plan to deal with those multiple pressures.

Olivia Blake

We have had a long conversation today about whether there are unrealistic deadlines or unrealistic projects. Will local areas be carrying the blame for these delays to projects? What support will you be giving local authorities to communicate this?

Will Garton

From the Department’s perspective, it is certainly not about blame. It is about trying to learn lessons from previous involvements and exercises, and trying to do it better next time. We have tried to articulate that in the funding simplification plan that we published in the summer. That was our best attempt at coming up with some practical and concrete ways in which we can do this better and continue to learn. No, it is definitely not about blame. We are trying to make the system more responsive and better by increasing flexibility for places, by giving them funds over a longer period of time, as we have done with the UKSPF, by allocating more often than not—although, as Sarah says, I recognise that there is still a role for competition—and by giving places money to support the commercial negotiations that they may be doing, the delivery associates that we are funding and the discovery programme that we have put in place. We see it very much as a partnership, and we should be doing everything we can to enable local authorities to get the projects away.

Chair

Can I just be clear on the delivery associates? Are you giving some of the money that would be in the bid to delivery associates, or is this extra funding?

Sarah Healey

It is extra funding.

Chair

Can you give us examples, Mr Garton, of what you mean by delivery associates?

Will Garton

Yes, that might be expertise on procurement, commercial negotiation or subsidy control.

Chair

Are they consultants or people from Government?

Sarah Healey

Yes.

Will Garton

Yes, but they might be very specialist. For example, if in a smaller local authority you did not have procurement expertise, and that felt somewhat daunting, one of the delivery associates would be able to help.

Chair

Just to be clear, this is different to the money that you were giving for capability to bid in the first place.

Sarah Healey

It is different.

Jess Blakely

This is part of it.

Chair

Is this additional funding from your reserves, from your core budget?

Jess Blakely

There is an additional £65 million of funding.

Chair

This is what you mentioned right at the beginning, Ms Blakely.

Jess Blakely

The £6 million is for the delivery associates, which is the contract Will Garton was just talking about. We also gave £38 million in direct grant support to local area participants and £11 million to mayoral combined authorities. It does split down. We also gave some funding to DCMS for specific heritage support. We have taken that £65 million and spent it in different ways based on what the different needs of the areas were.

Chair

When you say “taken,” can we just be clear?

Sarah Healey

It is extra funding that has been identified by us from our budget to be spent on this in order to address some of the issues with delivery that were being experienced by local areas and procure expertise to support them.

Jess Blakely

Yes, exactly.

Chair

That is very clear. Thank you very much for that.

Olivia Blake

I was just going to ask about lessons learned. You led into that quite nicely, Mr Garton. Can you explain what lessons have been learned from the 10 pathfinder simplification pilots and how you are planning to apply these lessons in the future funding streams?

Will Garton

It is still relatively early days for the pathfinders. We will publish later this year what we have found so that everyone can see it. With the pathfinders, we have moved from local authorities running a series of individual projects to starting to think about these interventions as a programme. That might sound technocratic, but it is important. It allows local authorities to have one set of data that they report to us, one delivery timescale and one payment schedule. For example, we had a situation in Birkenhead, in the Wirral. The Wirral was getting funding from four different pots for streets in close proximity to each other. That no longer exists. It is now one plan and one payment. We have another example in Wolverhampton, where funds were flowing to both the FE college and the local authority for FE capital work. Again, that has been squashed together as one programme. The feedback that we have from local authorities is that this makes it easier for them to deliver and gives taxpayers better value for money because they think about budgets and outcomes, not about siloed funding streams. We will continue to evaluate the progress of the 10. We will publish more next year. I hope that will inform our approach to the next spending review.

Olivia Blake

Finally, I want to ask about the burden of data collection. From the data you are gathering, do you feel you have enough true accountability in this process for you to understand the progress that is happening at a local level?

Will Garton

I genuinely do. As I said earlier to the Committee, we collect an awful lot. We have 400 indicators across 13 funds. Some of that is really useful. I want to be careful not to get this wrong, but one of the metrics might be, “How many metres of your high street have you regenerated?” When I sat down with the team and talked through this, it was not absolutely clear to me that 70 metres is much better than 50. It depends on the quality and the circumstances.

Chair

That was an indicator, was it?

Will Garton

That is an indicator that we are currently collecting.

Chair

Who decided on that indicator?

Will Garton

We did. I think 400 indicators is too many.

Chair

Who decided on the 400 indicators?

Will Garton

It is a culmination of the 13 different funds that we are monitoring and getting information for. We want data, clearly.

Chair

I just wonder who came up with the number of metres of the high street.

Sarah Healey

It could be somebody trying to find a concrete measurement so they could show specifically what had been delivered.

Will Garton

Then they could evaluate it, come to PAC and show you.

Sarah Healey

They did not necessarily think about whether it was the right outcome indicator to point to in order to say whether a high street is a better high street, whether it is a better environment for people or whether it is generating more economically. Those are all quite difficult things to ascribe to the spending of a fund. It is much easier to ask, “Has the fund delivered x amount of geographical change?” These things are always a balance.

Chair

We could discuss the metres of the high street forever.

Will Garton

We are rationalising them.

Mr Francois

Have you ever been to Long Melford?

Will Garton

I have not, no.

Mr Francois

The clue is in the name. It has one of the longest high streets in England. I would be very interested to know how this metric works there.

Chair

Walthamstow claims the longest in Europe.

Mr Francois

Does it? Okay, that is fine.

Chair

There we go. Olivia Blake, I do not know where Sheffield comes in.

Sarah Healey

Sheffield city centre is doing an awful lot to change the way it is planned and organised.

Chair

You are trying to catch Ms Blake out and divert her questions.

Olivia Blake

You are flattering me now. I worked on that as deputy leader. It is a long-standing project, as you will know. This is, I guess, my key question. Given that you are scrapping this fund-by-fund approach, is there ever going to be a point where you re-evaluate this and say that using a place-based model was not the right way of delivering this funding to areas? It feels like this may have been a bit too top-down as a way of delivering in a place.

Sarah Healey

I will start, but I know Will has strong views on this topic. I will begin and then let him carry on. There is always a balance to be struck here. When we say in our funding simplification plan that we are setting the bar higher for delivering things via separate funds and we want to consider allocative rather than competition-based approaches, that does not mean abandoning a place-based approach to funding. We have shown that with the long-term plan for towns and in our levelling-up partnerships. That is partly because a single fund or a single allocative approach cannot necessarily meet all the complex needs that a local area has. It does not give that local area, which we might not know enough about, the opportunity to tell us about something that, if funded by central Government, could make a really significant difference to it but would not necessarily be funded by an annual allocation, for instance. There will always be a case for a balance. What we have said in the funding simplification documentation, and what we have shown by some of the approaches we are testing with the pathfinders, as you indicated, is that we recognise the issues for local authorities in having quite so many centrally driven separate funds coming from central Government to local government.

Will Garton

I agree with that. The only thing I would add—I know I have bored the Committee with it relatively recently, so I will be brief—is that elsewhere, in Greater Manchester and the West Midlands, we are moving to a single economic settlement. We are making quite a big change, where we are merging and pooling capital across DLUHC’s budget, the Department for Transport’s budget, the adult education budget, and retrofit. There is flexibility between those pillars. It is a very different approach. We have expressed an openness to extending that to other mayoral combined authorities at the spending review following. That is taking an entirely place-based focus. Instead of thinking about funding in departmental silos, we have asked the Mayors of those two localities to think about it holistically. My assessment is that we will get better value for money as a result.

Sarah Owen

Mr Garton, on the flexibility of 30% within existing projects, could you tell us how that figure was come to? Why is it 30%, not more, not less?

Will Garton

It is a bit of a judgment. I will not pretend it is a precise science. We looked at the number of project adjustment requests that we had and at how much they were in terms of outputs, outcomes and budgets. Having looked at all the ones that we had received, we went a bit higher, so we could give adequate flexibility to local authorities but still strike a balance with giving us some assurance that a project was not completely different to what had been originally envisaged.

Sarah Owen

Have you made an assessment of what meaningful difference this is going to make to a local area? If projects that are already delayed and overstretched are working within their existing budgets, how is that going to work?

Will Garton

As I said, we are evaluating how it is going constantly. The policy was put in place in July last year. It has had some time, but it is still relatively early days. As I said earlier, the requests are down by a third. That tells you something. We will certainly look at this policy in conjunction with the pathfinders, where there is complete flexibility. We will put something out later in the year that tries to give an assessment of whether this has been successful, what else we can learn and how we can use it to inform the next spending review period.

Sarah Healey

It is also an intervention where we would be keen not to wait for a lengthy formal evaluation process, in order to learn from it and apply those lessons.

Sarah Owen

On simplification as a whole, the bidding process and some of the feedback from councils, I am sure it will not shock our witnesses to hear that the response from local authorities was not exactly glowing. The written evidence from South East Councils described how it contributes to a begging bowl culture, where councils are required to spend too much time and money to meet the ever-changing demands of Ministers, rather than planning for the long term to truly deliver for their communities. When it comes to the simplification rules, we have talked about that 30% flexibility, but has there been an honest reflection about how open and transparent the process was for local authorities, particularly when it came to local authorities that never stood a chance of receiving any funds?

Sarah Healey

We have certainly reflected on all our engagement with local authorities. Clearly, we reflected on what the experience of the bidding processes was like, because we have changed it. That was as a result of reflecting on how that experience had been reported back to us. As a result of that, we introduced our funding simplification doctrine, which does not apply just to DLUHC and how DLUHC does its funding of local authorities; it applies to the whole of Government in order to try to reduce the multiplicity of funding streams that we were discussing earlier. We have also enhanced the feedback that we have given to local authorities who have not received funding, in order that they understand why that judgment has been made, because we recognise the frustrations that many felt.

Sarah Owen

I am glad that the witnesses accept there were frustrations, but why would you have to wait for feedback from local authorities to say they were unhappy with the bidding process, where the rules of the game were not laid out to them honestly and up front? May I just give an example? There were a number of councils and local authorities that put bids in for levelling-up funds. They never stood a chance because either they had been successful in previous rounds and they were not told that they would not be successful again or, particularly in places like mine, in Luton, they were told that because a neighbouring constituency had been successful, they never stood a chance. Why would you need to wait for feedback from local authorities to know that that was not acceptable?

Sarah Healey

I should explain. I fully understand how frustrating that decision was. It was not taken up front. It is not the case that there was never a chance that bids that were submitted in LUF round 2 for places that had received funding in LUF round 1 would succeed.

Chair

The rules changed. That is the point.

Sarah Healey

The rules changed. Ministers took a view that, having seen the number of bids that were received for LUF round 2, it was only fair to ensure that areas that had already received funding did not receive further funding at the expense of areas that had received no funding. That was the decision that was taken. Clearly, as a result of the way that the allocation was done in round 3, some of those bids became eligible again. Indeed, half of the bids in LUF round 2 that would have been able to be funded except for that exclusion were funded in LUF round 3.

Sarah Owen

The problem is that this burden—you have spoken eloquently about the risk of burdens and never wanting to put extra burdens on local authorities—has fallen on local authorities that are really hard-pressed to put together a bid in the first place. The LGA has said that, on average, each local authority spent around £30,000 of taxpayers’ money putting in a bid, which, if they had known the rules of the game, they probably would not have all put in for. That is just the tip of the iceberg. Some £27 million was spent on private consultants by local authorities, at a time when they do not have the money to do so. In terms of simplification, feedback and your evaluation of this, will you be looking at reducing the cost and extra burden on local authorities?

Sarah Healey

We will be looking at it, but we have already taken action as a result of that, precisely to move away from the use of competitions, to enable greater flexibility between funds and to reduce the amount of central Government monitoring and control of the changes that are made.

Sarah Owen

In future bidding, will sign-off still be required from MPs? That seems laughable in the face of the improvements to the relationship between local authorities and DLUHC that are supposed to have happened with the simplification process.

Will Garton

The role of MPs is a policy decision for Ministers to make. Ministers have been clear, reasonably, that they want MPs to have a role. They certainly want that, for example, in the long-term plan for towns.

Sarah Owen

An MP can still override a bid from a local authority to DLUHC.

Will Garton

An MP does not have a veto, but we have made a policy decision that MP support can be a factor.

Sarah Owen

It can be a factor. We were told in levelling up 1 that it was a deciding factor.

Will Garton

That would be a clearer way of putting it. It is a factor, yes. It is not a veto, though.

Chair

It is a continuing factor, just to be clear.

Will Garton

Yes.

Sarah Healey

Future decisions on the administration of funds are for Ministers, not for us. I cannot tell you exactly what decisions Ministers will make about the involvement of MPs in future funding streams.

Sarah Owen

In terms of the rules of the game for the future, local authorities are still none the wiser because this is still at the whim of Ministers to change the rules of bidding.

Sarah Healey

The design of funds and the way that the policy on funding is determined is always a matter for Ministers.

Chair

I saw the towns fund accounting officer assessment from your predecessor, and, in fact, the private one. It is written in a way that allows a lot of flexibility, if I can put it politely.

Sarah Healey

Clearly, we offer advice in the normal way. You can point to the transparency of how we have allocated more recently and how those things have been determined more recently to see what the policy direction is. I could not guarantee what decisions Ministers will make about this in future.

Chair

It is interesting, though. Picking up on Ms Owen’s point about MPs being involved, as far as I am aware, there is no requirement for MPs to have any particular involvement before they sign it off. Most MPs would support something good for their area; that is what we do. The fact that it is a good thing suggests that you are expecting all MPs to engage with the funding and the detail.

Will Garton

That is a matter for individual MPs. This is about the design of the funds. Where we have asked for MP involvement, it is because we want to be clear that the MP supports the projects and it is not just the local authority that has a view. That is a policy decision.

Sarah Owen

Have you had any feedback from MPs on the process at all?

Sarah Healey

I believe our Ministers have had a lot of feedback from MPs about the process.

Sarah Owen

Have they had formal feedback that you have taken on board?