Inflation, skills shortages and hesitation in government decision-making are behind significant delays to levelling up projects, according to a new National Audit Office (NAO) report.
The report found that many Towns Fund and Levelling Up Fund projects are experiencing delays, and are unlikely to be completed to schedule.
Out of 1,300 supposedly ‘shovel ready’ projects, only 64 had been completed as at 31 March 2023, while 76 had not been started. Projects are therefore needing to be adjusted or rescoped.
The Department for Levelling Up, Housing & Communities (DLUHC) has allocated £9.5bn to local places to be spent by 31 March 2026. But as of March this year, less than £1bn had been spent, the NAO said.
The NAO report also found that 50% of the main construction contracts for Levelling Up Fund projects due to be completed in March 2024 were unsigned, as of March 2023, with the figure rising to 85% for projects due to be completed by March 2025.
“Projects are being delivered in the context of rising costs and pressures on public finances,” the NAO said. “Reflecting this context, DLUHC has taken steps to understand local authorities’ delivery challenges and is piloting a more flexible approach to move money between Towns Fund and Levelling Up Fund projects. However, at this stage it appears unlikely that local authorities will be able to complete projects by the original deadlines.
“The ability of projects to deliver all their intended benefits will rely on DLUHC and local authorities working together to unblock those projects which are delayed or have not started and set realistic expectations for delivery.”
DLUHC has also made “significant improvements” in its approach to evaluation, according to the NAO, “which puts it in a better position to understand future impacts delivered by these funds. DLUHC has ambitious plans for the evaluation of each fund, has sought external input and is undertaking feasibility work before committing to final approaches. Most of this work is still to come and further funding will be needed to understand the effect of the projects over the longer term.”
The report noted that it was important that any “high-quality learning from this evaluation work” be shared with local decision-makers “to support better value for money in future economic growth approaches”.
To secure value for money and maximise the desired benefits from these funds, the NAO said DLUHC should review expectations for what outcomes can be delivered by when and support local authorities and their partners “to deliver the long-term benefits for people in their local places”.
Gareth Davies, head of the NAO, commented: “DLUHC is in a better position to understand the benefits these funds deliver following significant improvements in its approach to evaluation. But the department and local authorities will need to work together to unblock projects which are delayed or have not started and set realistic expectations for delivery.
“It is important that DLUHC shares the insights from its evaluation work with local decision-makers to help them achieve better value for money and reduce regional inequalities by improving the places people live.”
Responding to the report, Martin Tett, chairman of the Local Government Association’s People and Places Board, said: “Levelling up has great potential to transform people’s lives and livelihoods, with councils best placed to make this happen.
“Inflation and rising construction costs, along with wider supply and skills shortages, have all contributed towards projects being delayed. The government has made important steps towards providing greater flexibilities on how councils can spend their existing funding and streamlining the long list of local funding pots.
“We want to see a greater push towards place-based investment and the continued move away from the competitive allocation of short-term funding pots. We look forward to the next round of the Levelling Up Fund as evidence of the government’s progress in this area and continue to call for councils to be given the opportunity to realise the benefits of joined-up funding, to be made available to every part of the country.”
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