Levelling up: political catchphrase or future of the economy?

First announced by Boris Johnson’s government in November 2020, the Levelling Up Fund is part of the wider “levelling up” agenda, which is designed to address the economic disparities between different areas in the UK.

More than two years on and two funding rounds worth £3.8bn have been announced from the £4.8bn fund. But how much of it has gone to “levelling up” the UK’s most deprived areas? We investigated whether the government’s plan is currently carrying out its explicit purpose or whether it was clever political rhetoric.

Where has the funding been allocated so far?

As mentioned above, so far there have been two funding rounds for the Levelling Up Fund. The first round, the results of which were announced in October 2021, saw £1.7bn awarded to 105 projects. Results for the second round were announced on 19 January 2023, and saw £2.1bn awarded to 111 projects, bringing the total to £3.8bn awarded to 216 projects.

However, across the two funding rounds, there are striking disparities between where funding is being awarded. For example, the North West has received £586m from 27 successful bids, which is 13% of the total funding, whilst the North East has received £209m from 11 successful bids, just 5% of the total amount awarded. Interestingly, London, which accounts for approximately a quarter of UK GDP and is home to some of the UK’s wealthiest areas, has not been one of the fund’s main beneficiaries either.

James Forrester, Managing Director of Stripe Property Group, comments: “London is actually one of the regions to have benefited the least from the Levelling Up Fund, with the 14 successful bids seen across the capital accounting for just 6% of total awards granted.

“Just the East of England and North East have seen a lower number of successful bids, whilst the North East and Northern Ireland are the only areas to have seen a lower level of investment when compared to the £216m granted to London projects.”

At face value, the funding being allocated to London and the North West could be used to suggest the Levelling Up fund is, to some extent, going where it’s needed. Of course, the lack of funding being allocated to the North East, which is one of the UK’s poorest regions, is contrary to that point.

According to a Bloomberg data analysis, more than three in four constituencies that were already behind London and the South East in 2019 have fared worse on relevant socioeconomic metrics since then, with many of these areas being in the North of England and the Midlands. So, even though London has received a relatively low proportion of the Levelling Up fund, it seems the fund needs to go much further to address regional inequalities.

However, Simon Danczuk, former MP, and former Member of the Communities and Local Government Select Committee, said: “All the mainstream political parties should stop pandering to this notion that London gets more than its fair share of funding from central government. 

“People should recognise that London isn’t just the capital, it’s a major international city, on a par with just a handful of other such cities across the world. Of course, London is always going to perform better than Manchester or Newcastle, that is inevitable. London drives our whole economy because it services much of the world’s commercial activity, this is why we need to prioritise it in terms of government support.”

Is funding going to the poorest areas?

Looking at the Levelling Up fund on a regional level does not tell the full picture and the reality is that a more nuanced approach is needed to determine whether funding is going where it’s most needed.

During the March 2021 Budget, the government provided a prospectus for local authorities looking to make a bid to the Levelling Up fund. This stated that funding would focus on the areas “most in need of levelling up” and introduced a system ranking local authorities on a scale of 1 to 3, with those ranked 1 considered most in need.

Across both rounds, 121 of 216 awards were made to priority 1 areas. These awards had a combined value of £2.2bn, 59% of all funding awarded. The North West and Wales had the highest number of successful category 1 bids, with 20 each, while London and the South West had the lowest number of successful category 1 bids, with five each.

With 59% of all funding being awarded to priority 1 areas, most of the funding at least appears to be going to the areas that have been designated as needing it the most. However, according to Forrester, a recent study found that 61 of the top 100 most deprived areas in the UK have been completely ignored by the Levelling Up Fund.

He continues: “While London has received very little in terms of total investment, no less than two London boroughs feature in the top 10 areas that are considered the most deprived and received no LUF funding at all. This is quite remarkable and again demonstrates that this funding isn’t being focused in the areas it should be. “

So, with the UK’s most deprived areas appearing to be ignored by the fund, perhaps the issue is the areas being designated as priority 1 are not actually those in most need of “levelling up”, and a more reliable criteria for determining where funding is needed most is required.

Where was funding going before?

To continue to examine the effectiveness of the Levelling Up Fund, it’s also essential to consider whether the level of funding provided to local authorities has increased in the years since it was announced.

According to the Institute for Government, in 2020, the amount of money spent by the government per head was the highest in London, with £10,835 being spent per person. However, the region with the lowest spending per head was the East Midlands, with £8,879 spent per person.

When compared to the Levelling Up Fund, across its two funding rounds, London has received the lowest level of funding per head, at £24. The East Midlands, however, received the fourth-highest overall funding per head, with £78, which suggests the Levelling Up Fund is somewhat addressing the disproportionate amount of public spending per head on a regional level. However, as London is home to some of the UK’s most deprived areas, this does not necessarily indicate funding is going to the areas in most need of levelling up.

What’s next for Levelling Up?

The government has confirmed there will be a third round of the Levelling Up Fund, so is it the future of the economy or is it just a political catchphrase?

Andy Street, the Conservative Mayor of the West Midlands, has criticised the fund’s current bidding process and the “centralised system” of allocating funding, arguing the process should be “devolved for local decision makers to decide on what’s best for their areas.”

Danczuk, however, believes the current system is fine but thinks we should scrap the Levelling Up Fund. He comments: “We are a relatively small country geographically, and there is no real evidence that devolving more decisions to a very local level will help achieve very much. The governing structures we already have in place are more or less okay for running and prioritising services.

“Politicians like Andy Burnham, the Mayor of Manchester, should stop creating an ‘us and them’ divide between the North and London, and should start cooperating more with central Government. Initiatives like the Levelling Up Fund should be scrapped and allocations of money from Whitehall shouldn’t be based on competitions but should be based on need to achieve economic success for the country as a whole.

“All the major politicians pay far too much attention to trying to level the economy across the UK, when the reality is that London will always be our major economic driver. They should just accept that and celebrate it.”

Forrester believes that the fund is not working.

He concludes: “It’s not just London that has suffered from this lopsided approach to levelling up. The North West has seen the largest level of investment made, while the North East has seen the lowest. So, all things considered, it’s fair to say that the Levelling Up Fund has amounted to nothing more than electioneering and will do little to rebalance the books on a national scale.”