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18 January, 2022

Weekly data: The problem with levelling up the UK

Much is being made of the UK's levelling up agenda, but is the funding going to the right areas or regions?

By Ben van der Merwe

As the UK government prepares to publish its white paper on levelling up later in January, a new report suggests that funding so far has failed to target the areas most in need.

Researchers at the Centre for Inequality and Levelling Up (CEILUP), based at the University of West London, found that 61% of the most deprived areas in England have not been allocated any funding from the £4.8bn Levelling Up Fund (LUF).

The allocations, made in October 2021, were intended to provide for infrastructure investment in deprived areas. The researchers found that one-third of LUF funding was allocated to areas among the 70% least deprived, as was 71% of the £221m UK Community Renewal Fund.

The researchers measured deprivation using the Indices of Multiple Deprivation (IMD), a widely used official measure of local areas’ economic and social well-being. The government’s allocation of LUF funding, however, uses a bespoke formula based on factors such as local productivity, unemployment, skills, transport connectivity and housing vacancy rates.

The government’s formula classified only 59 of the 100 most deprived areas in England, as defined by the IMD, as being in the highest-priority bracket.

The new funding formula may have had party political implications. An equal number of funding applications for English areas were sponsored by Labour and Conservative MPs, despite the fact that 77% of the 100 most deprived constituencies are held by Labour MPs.

Investment Monitor’s own analysis found that, among the most deprived urban areas receiving funding, more ethnically diverse local authorities received less per capita funding than less diverse ones. Those that were among the 20% least diverse in England and Wales were allocated 28% more funding per capita than those that were among the 20% most diverse.

Professor Graeme Atherton , who co-authored the report, questioned the decision to use a custom-made formula. “You have got areas that, by the IMD and by other research relating to deprivation, appear not to be featured in the allocation," he says. "There doesn’t seem to be a clear rationale for why they would use another formula. We have got a formula that is already in place that highlights areas of need.”

What will levelling up actually do?

Part of the problem appears to be a confusion about what 'levelling up' is actually supposed to accomplish. In a July 2021 speech, Prime Minister Boris Johnson attempted to outline the purpose behind levelling up as a policy agenda. He told the audience: “It is an outrage that a man in Glasgow or Blackpool has an average of ten years less on this planet than someone growing up in Hart in Hampshire or in Rutland.”

Despite this, Blackpool (which is also Atherton ’s home town) has not been allocated any funding.

Atherton told Investment Monitor: “Blackpool features on every unfortunate league table of public health and poverty that one can find, yet it appears to have received no funding from the LUF. If you want to address issues such as life expectancy, as the prime minister’s speech suggested, then you have to include those things in the formula. 

“Instead, we see a huge weight being given to transport. Transport’s great, but if you can’t afford to use the transport in the first place what is the point of it being there? Poorer boroughs of London have also seen very little funding allocated – that is possibly because of the heavy weighting given to transport.”

Despite the emphasis on transport in the funding formula, the study found that only 13% of LUF funding was allocated to rural areas.

Poorer areas of the UK still playing catch-up on funding

The government’s focus on levelling up comes after more than a decade of cuts to local government funding. CEILUP’s report found that for 68% of the areas that received LUF funding, the new funds failed to make up for cuts experienced since 2016. 

The government’s highly anticipated white paper on levelling up is due to be released by the end of January (although some claim it could be delayed until March or April). Atherton hopes that the government will use it as an opportunity to announce additional funding.

“If you look at what the evidence shows, if you are going to affect inequality you need significant investment," he says. "The money so far does not compensate for the funding reductions most of these places have actually experienced in recent years.”

Atherton also notes that funds have largely been allocated for projects relating to physical infrastructure and construction, neglecting the social infrastructure of these areas that has been deeply affected by austerity.

“Things like youth clubs are a relatively small investment relative to the money required to undertake large physical-build projects," he says. "Yet, the returns for those kinds of investments are usually relatively high. The same goes for health. The economic impact of poor health is very significant.

“But you also need to look for much more individual missions of what a place could look like, instead of trying to make everywhere look like the wealthier parts of London and the South. We need to see some innovative thinking.”

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