Levelling off

This year has seen three prime ministers in office in less than three months and policy flip-flops on tax, immigration and energy strategy. So, what of the high hopes for the levelling up agenda? Richard Young reports.

“It’s the economy, stupid.” Thirty years after the slogan was used to great effect by Bill Clinton’s election team, the phrase has fresh relevance for the UK government’s levelling up agenda. The parallels are clear: growing inequality, a cost‑of‑living crisis, a recession and a right‑of‑centre government 12 years into its rule.

Former Prime Minister Boris Johnson’s flagship policy for addressing regional inequalities is also now in the balance, in the face of some harsh economic realities facing Prime Minister Rishi Sunak. For project managers involved in levelling up bids – or infrastructure programmes that underpin community projects – the next couple of years promise to be interesting.

There are some positive notes. Michael Gove, reappointed as Secretary of State for Levelling Up, Housing and Communities, is known as a ‘doer’ in government circles – someone who likes to have command of his brief and make things happen. And the reappointment of ‘red wall’ young gun Dehenna Davison as the Parliamentary Under‑Secretary for Levelling Up hints at a degree of continuity for the policy – and an ongoing voice for the north.

And November’s autumn statement did aim to strike a positive note. Infrastructure is important, the Chancellor said, in connecting wealth to every corner of the country. Capital cuts would be “an easy option… that limits our future”. So Sizewell C will retain some government funding; Northern Powerhouse Rail and the Manchester HS2 link will be funded. ‘Levelling up’ remains a watchword. APM’s Chief Executive, Professor Adam Boddison, said: “The key words the Chancellor used when presenting this budget were ‘balance’, ‘stability’ and ‘growth’ and it is clear to see that the power of projects to deliver economic and social benefit has been recognised.”

Pitching your projects

The main Levelling Up Fund is “designed to invest in infrastructure that improves everyday life across the UK… The £4.8bn fund will support town centre and high street regeneration, local transport projects, and cultural and heritage assets.”

‘Levelling up’ also encompasses a range of other programmes. In the first round of bidding, £1.7bn was awarded to 105 projects. Restoring castles, redeveloping shopping centres, converting redundant community facilities into business hubs – the range of projects in the 2021 first round was diverse and national. But as with any project tender process, bidding has not been straightforward. Bidders have to fully cost their plans in line with a host of regulations, and there are limits on how many projects, and of which type, authorities can enter for consideration.

The second round of bids opened on 15 July 2022 and closed just two weeks later, leading many local authorities to complain that even just putting together project bids was a massive drain on resources. And bids are competitive, pitting projects against one another. No wonder most authorities and businesses engaged on levelling up projects have called for a massive simplification of the process – and more local autonomy on spending. So, while the second round should be funded to the same £1.7bn level, challenges endure.

What gets measured, gets managed?

Complicating matters is the National Audit Office’s (the NAO’s) report on the Department for Levelling Up, Housing and Communities, published in February. It criticised the government for a lack of results from spending on the regions between 2011 and 2020 – including £12bn from the Local Growth Fund and £3.2bn in Regional Growth Fund grants – that had left the UK with “regional disparities in economic performance that are among the largest in the OECD”. The report went on: “The Department… lacks evidence on whether the billions of pounds of public funding it has awarded to local bodies in the past for supporting local growth have had the impact intended. And it has wasted opportunities to learn which initiatives and interventions are most effective.” No wonder the levelling up select committee launched its own formal inquiry into how funding is allocated – and whether projects are offering value for money – in October.

But one problem is that, in many cases, it’s hard to quantify the outcomes of a project. In the 2022 Levelling‑up and Regeneration Bill, the government itself states that one of the four objectives of levelling up is to “restore a sense of community, local pride and belonging”. That’s hard to measure. And a survey by think‑tanks UK in a Changing Europe (UKICE) and The Policy Institute found that the public’s top priorities for improving their local area were crime prevention (36%) and healthcare access (32%). Infrastructure projects such as faster broadband (13%), public transport (18%) and even housing (20%) were much lower down the list.

“For project managers, that means being very clear on the strategic case in project proposals,” says Emma Willson, Major Project Delivery Hub Director at the NAO. “Yes, ideally everything would be quantified, with a clear link to specific increases in investment in any given area. But you need to be realistic. In many levelling up projects, it’s the qualitative, wider impacts and outcomes that are just as important.”

Sweating the big stuff

In all, about £11.4bn will be allocated through the various levelling up funds over five years. But the most important projects to create “opportunity for those furthest behind” may be the big‑ticket items funded from other pots: major transport infrastructure, new energy projects and investment zones. “Major programmes are essential to achieve the UK government’s ambition to level up,” says Daniel Armanios, BT Professor of Major Programme Management at Oxford University’s Saïd Business School. “Not only do they physically improve the area by building on infrastructure and resources, they also provide scope for social and economic empowerment at scale.”

There has to be balance, according to Sir John Armitt, Chair of the National Infrastructure Commission. “Infrastructure isn’t a magic wand for levelling up,” he warns. “You have to see a balance of initiatives. Skills are key, for example. Yes, infrastructure can make a region more attractive to inward investment. But the priorities need to be set at a local level.”

This point is echoed by academics from The Productivity Institute, who point out that “growth tends to be stronger… with higher levels of public investment in education and human capital, where there is consistent support for R&D to spur innovation”, as well as investing in infrastructure. The stumbling block is that cancelled or frozen infrastructure projects mean fewer opportunities to widen the skills base and keep workers busy in the regions most in need of their income and with less need for R&D.

It’s a catch‑22. To invest in economic regeneration (via civic pride, regional skills development or infrastructure), you need economic growth. But a crucial way to deliver that growth is to address regional underperformance. With every government department expected to find “efficiencies” to address the deficit, extension of the existing levelling up funds is unlikely. “Tackling geographic inequalities in health, wealth and life chances across the country will require more than changes to public spending,” said David Phillips, Associate Director at the Institute for Fiscal Studies, at the launch of its report into levelling up in October. “But how spending is allocated between places does clearly matter, especially for those typically more disadvantaged people most reliant on public services. Council, police and public health funding bear less relation to estimates of spending needs each year, with no way to account for how changes in local circumstances can affect spending needs.”

Local heroes, national leadership

The most viable approach is to empower local authorities to green‑light projects more quickly. “We’ve always argued against the competitive bidding approach,” says Armitt. “It’s more efficient to have a stable allocation of funds that allows local authorities to decide what they can invest in in their areas.” The UKICE survey of public attitudes to levelling up bears this out: people don’t like ministers or even local politicians deciding allocations very much. “The most popular option amongst respondents was a needs‑based formula for allocating investment,” says their report. “The second most popular option was a bidding process judged by independent experts.”

Experts? That opens the door for project consultants and others to make the case for investments with real rigour. Yes, qualitative rationales can be part of the picture, and local sentiment must be respected, but the professional project manager clearly has a huge role to play. “Delivering levelling up is all about project management,” former cabinet member the Rt Hon Justine Greening told Professor Boddison in September. “It’s all about delivery on the ground.” And, she added, it’s important that projects designed to deliver social mobility are retained in the broader, regional levelling up agenda.

“What we have heard consistently from government is that they believe infrastructure is extremely important,” says Armitt. “They recognise the need to accelerate the planning process, which is not going to be easy. But a lot of the discussion around infrastructure is positive.” Sustaining that positivity during a tough 18 months for spending departments – and in projects on the ground – is going to be key.

Does levelling up have a future, then? “We have a Levelling Up Minister; a Tory Northern Research Group keeping this on their agenda; and a policy slate that’s currently going through Parliament,” says Dr Lawrence McKay of the University of Southampton. “So it does have a future – but its priorities remain open to question.”

Project discipline, efficiency, accountability and outcomes will be essential to guide levelling up through the new bout of austerity. The prize is a fairer, more growth‑oriented economy that is better able to tackle long‑term challenges such as net zero and social mobility. No pressure then…

 

The levelling up patchwork: funds explained

Levelling up covers much more than just the £4.5bn Levelling Up Fund. How is the rest of the patchwork of initiatives doing?

UK Community Renewal Fund (CRF)

£220m ahead of the launch of the UK Shared Prosperity Fund (UKSPF, the replacement for EU structural funds) in 2022. By November 2021, 225 projects worth £125m had been announced by 52 councils. The Local Government Association (LGA) was concerned about the time and resources needed to “prepare, promote, assess and work with partners to strengthen project bids”. Inconsistencies in project management across authorities and patchy budget control hurt rigorous CRF project evaluation, too. The LGA did conclude that a less competitive bidding process and more budget flexibility has been built into the UKSPF, launched in April and offering £1.5bn per year “by 2024/25” (compared to £2bn per year from comparable EU funds, according to parliamentary estimates).

UK Community Ownership Fund (CUF)

£150m over four years to help communities buy assets in support of social wellbeing. By May (when the second-round prospectus was published), the CUF had funded 38 projects totalling £10m. Bidding in the new rounds has been simplified, but the qualification process remains complex – and centrally administered.

Freeports

Regional hubs for global trade and investment, featuring lower taxes, customs concessions and limited capital investment. The first eight freeports (from 18 bidders) were announced in 2021, with Teesside and Thames facilities being the first to operate under the new rules. Project opportunities will be almost exclusively commercial (as with enterprise zones).

UK Infrastructure Bank (UKIB)

Financing for local authority and private infrastructure projects around climate change and regional economic growth. It will administer £22bn in “loans, credit enhancement and equity investments” as well as offering advisory support for project development and delivery to local authorities. Project managers working with local authorities, in particular, might benefit from using UKIB project evaluation standards: can you spin a low-carbon, high-return project case?

Towns Fund

£3.6bn for regeneration of deprived towns, Project’s favourite manifestation of levelling up. Why? It has an entire section of its website devoted to project and programme management, including advice on pitching projects, making submissions and transitioning from business case to development to execution. Check out townsfund.org.uk/project-and-programme-management. Sadly, it’s now smaller than planned. Some funds were diverted into the Levelling Up Fund after the first tranche of ‘winning’ town projects was selected in summer 2021.

 

The desirable dozen

Levelling up might have many funds and some challenging project proposal processes, but the starting point for pitching projects – and standing up their business case – is the 12 stated levelling up missions:

1. Increase pay and productivity across the UK.
2. Boost public investment in R&D outside the South‑East by 40%.
3. Wipe out illiteracy and innumeracy – focus education spending on the most disadvantaged areas.
4. Increase participation in high-quality skills training.
5. Get public transport around the regions closer to the standard seen in London.
6. National gigabit broadband by 2030; 5G coverage for most households.
7. Increase first-time homebuyers in all areas; halve “non-decent rented homes”.
8. Narrow life expectancy gap between areas.
9. Improve well-being across the UK.
10. Boost civic pride – in town centres, local culture and community.
11. Reduce violent and neighbourhood crime, especially in the worst-affected areas.
12. Devolve power to regions that want it, with simplified, long‑term funding.

 

THIS ARTICLE IS BROUGHT TO YOU FROM THE WINTER 2022 ISSUE OF PROJECT JOURNAL, WHICH IS FREE FOR APM MEMBERS.