Room151’s editorial director discusses indications from ministers that they are willing to move away from competitive bidding and return to a more ‘balanced diet’ of funding.
At Room151’s recent investment forum for treasury managers there was a general weariness when the subject of competitive funding was raised. Even those that had been successful in their bids had found the process draining and uncertain.
The exercise was summed up pithily by Professor Stephen Broomhead, chief executive of Warrington Borough Council, as the “tyranny of competitive funding”. It is not a new complaint, but the number of pots that require a bidding process has been increasing as central government has endeavoured to take control of local government funding for the levelling up agenda.
There is a whole plethora of funds that support economic growth and for which local authorities have to compete or are shortlisted and “invited to bid for”. These include funds for: levelling up, community renewal, towns and freeports.
Preparing bids for these funds is a time-consuming and resource-intensive affair. The better-off authorities seek the help of consultants – potentially resulting in an outcome based on the best application rather than the best proposal. Winners often receive only short-term funding, with no guarantee that this will be extended.
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And, of course, there is the opportunity cost of what could have been done by senior management if they weren’t overseeing numerous bid proposals. At the Room151 investment forum, the constant refrain from delegates was that they no longer have thinking time or the opportunity to contemplate long-term strategy – the day job is all-consuming.
This isn’t to say that funding should be distributed without due care and attention – just that perhaps central government oversight is too constrictive, and sometimes a formula-based approach would be more appropriate.
There appears to be a growing consensus that the pendulum has swung too far away from formula funding. CIPFA and the Local Government Association have both been critical of the direction of travel. And, according to February’s report from the National Audit Office (Supporting Local Economic Growth) “multiple funding pots and overlapping timescales, combined with competitive funding, create uncertainty for local leaders”.
At the Room151 investment forum, the constant refrain from delegates was that they no longer have thinking time or the opportunity to contemplate long-term strategy – the day job is all-consuming.
‘Duplicative process of applications’
If only the secretary of state for levelling up thought the same way. Well, strangely enough, it seems he does. Addressing a Respublica online discussion last week, Michael Gove admitted that there was too much competitive funding in local government. “There is a duplicative process of applications being entered, and some local institutions simply do not have the capacity to jump through all of those hoops,” he said.
There needs to be “more of a role for formula-based allocations”, Gove asserted, and for local authorities to have more certainty about their funding. Well, he won’t find too many people in local government disagreeing with this point of view.
So, when will we see a different approach taken? To give the government some credit, the UK Shared Prosperity Fund, which will replace EU structural funds, is being set up so that all areas of the UK receive an allocation based on a formula rather than competitive bids.
And Gove has passed responsibility for “simplifying and rationalising” the funding process to Neil O’Brien, the levelling up minister. O’Brien also talks a good game, telling the levelling up committee in February that a “balanced diet” was needed, with a “baseload of stable, non-competitive funding that places know they will get so they can plan on that basis”.
We live in hope, but with little expectation given experience so far. A signal of good intent, perhaps, would be if there were an announcement on the long-promised reform of local government finance, or if there were any indications of a longer-term funding settlement.
I suspect the bid consultants will be kept busy for some time to come.
Mike Thatcher is Room151’s editorial director.
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