Last February, the Treasury lost patience with Michael Gove.
The levelling up secretary had just given a speech in Manchester during which he announced £30m to pay for improvements to substandard housing. Officials had already blocked him from using that speech to announce a larger pot of money for local authorities, and then they decided to stop him allocating any capital spending of £30m or more without Treasury approval.
Government insiders said at the time the chancellor’s officials had become frustrated with how badly the levelling up department was handling the allocation of £8bn of grants designed to tackle Britain’s regional inequality.
But many experts say the incident provided the perfect example of how clashing priorities within the government and heavy-handed intervention from Whitehall stymied the levelling up agenda from the outset.
“It is not that levelling up was going well at that point,” says one government official. “But that intervention was almost purpose-designed to make things worse.”
Boris Johnson once promised that levelling up would help unleash the potential of Brexit and solve Britain’s wide regional inequalities. The UK has a larger gap between its most and least economically productive areas than almost any other developed country.
The programme has been beset by problems from the start, including delays in allocating money and problems spending it. The Guardian has found that ministers are failing to make progress against half of the metrics they set for themselves at the beginning of the project.
Conversations with more than a dozen people inside and outside the government about the project paint a picture of how it has been knocked off course by intrinsic design flaws, political turmoil, bureaucratic procedures and soaring inflation.
“There is deep frustration and irritation at the way this has been handled,” says Meg Hillier, the Labour MP who chairs the public accounts committee. “For the government to have made nobody happy while handing out £8bn in public money is particularly disappointing.”
For some people close to the process, the problem with levelling up was that it over-promised.
“People’s expectations were that things would happen overnight and that is impossible, especially when it comes to capital spending,” says John Stevenson, the Tory MP for Carlisle and chair of the Northern Research Group of Conservative backbenchers.
For others, the design of several of the flagship schemes was flawed from the outset. To win money from the £4.8bn levelling up fund, councils had to bid against each other as well as against a complex and shifting set of criteria.
Instead of handing the money over to local authorities, or even regional mayors, to use over a multi-year period as they saw fit, Whitehall officials wanted to oversee almost every aspect of where the money was spent. The levelling up fund was allocated to projects as individual and localised as a leisure centre in Caerphilly and a planetarium in Ashfield.
Greg Clark, who was levelling up secretary for two months at the end of the Johnson government, says: “I did notice to my great regret how a lot of these funds were dictated centrally through often very bureaucratic applications to Whitehall.”
Henri Murison, the chief executive of the Northern Powerhouse partnership, set up as part of George Osborne’s ambitious project to reposition the British economy away from London, shares that criticism. “Writing cheques to Newcastle city council to build swimming pools is as far away intellectually from the devolution agenda as you can get,” says Murison.
The second round of bidding for the levelling up fund was repeatedly delayed. And then when councils had submitted their bids for that round, they were unexpectedly told they had no chance of securing the money if they had been successful in the first round of bidding.
Meanwhile, the government itself was changing. Out went Johnson, the original champion of the scheme, and in came Liz Truss as prime minister, arguing that too much attention had been paid to inequality. Soon after came Rishi Sunak, who as chancellor had been blamed for much of the centralised nature of the way the project was run.
“There has been a lot of moving around since the levelling up white paper,” says Clark. “I think there was a switch in political attention to some of the more existential questions about the government itself.”
The design of the scheme also lent itself to being used as a way to prop up votes in strategically important constituencies that the Tories hoped to win at the next election. An analysis last year by the Guardian found Tory seats had been awarded significantly more money for each person than areas with similar levels of deprivation.
Michael Heseltine, the former Conservative cabinet minister, says: “I listened to the budget and heard the chancellor of the exchequer say: ‘My honourable friend has asked for this much money, and here it is.’ It sounded like a lot of the money was going to constituency-based local authorities, and they are not equipped to do this sort of work.”
At the same time, the bureaucratic nature of the programme was being exacerbated by high inflation.
Having bid for projects on the basis that they were “shovel ready”, local authorities were finding the money did not cover their costs. And instead of being allowed to make their own adjustments, local officials were told to reapply to Whitehall either for more money or to reduce the scope of their original bid.
As a result, much of the money that has been allocated has still not been spent. A recent report by the public accounts committee found only 10% of the £10bn which has been promised has actually been spent. The Guardian revealed last month that only 20% of the projects under the towns fund have been completed.
“To have 10% of the money spent? Hang your head in shame – it is a disgrace,” says Miatta Fahnbulleh, formerly a civil servant, and now both head of the New Economics Foundation and a Labour candidate. “But herein lies the fundamental flaw – you have to be serious about devolving funding and responsibility.”
A spokesperson for the levelling up department said: “We have committed £15bn of levelling up funds to places across the UK since 2019, regenerating town centres, creating new infrastructure and improving everyday life for people across the UK. We recognise there is more to do and we are determined to accelerate this work.”
Labour has said that if it wins the next election it will scrap the levelling up label altogether, though shadow ministers insist they will stay true to the original aims of the programme.
Angela Rayner, the shadow levelling up secretary, says: “If we win the general election our number one job is to put local funding on sustainable funding – not pots of money gimmicks, but actually fixing the fundamentals.”
Some, however, worry that if the party does come to power, officials will be as reluctant to give up control over capital spending as ever.
“I was in government for a decade trying to work on this agenda,” says Fahnbulleh. “The thing that was painfully clear in that period is that people like to hold control over the levers of power. The Treasury finds it incredibly difficult to give that up.”
