MPs on the Public Accounts Committee say the running of the Towns Fund is opaque and “not impartial” .
With a bulging kitty of £3.6bn the government’s Towns Fund—a project to aid and boost ailing towns around England—should have been seeing happy days. Yet a report from MPs has concluded the fund’s management was “not impartial” and accused ministers of failing to consult with local organisations and officials.
The Public Accounts Committee (PAC) report makes for painful reading for the communities secretary Robert Jenrick and his officials. PAC members are “not convinced” by the government’s rationale for allocating funds to some towns and not others, finding minister’s explanations “vague and based on sweeping assumptions”.
The committee says one town was chosen for Towns Fund money despite being ranked 535th on a list of 541 towns listed in order of priority.
12th Local Authority Treasurers Investment Forum & FDs’ Summit
NOW A VIRTUAL EVENT + ZOOM151 Networking
Jan 20, 21 & 22, 2021
Pressure
Robert Jenrick, the communities secretary, has already faced questions about the selection of Newark—in his constituency—as a recipient of money from the fund, but the report saw the minister forced into yet another round of interviews with journalists to defend the project and his decisions. Jenrick is a calm speaker, but the report gives journalists much ammunition to put him under pressure.
The Towns Fund has attracted a lot of controversy in only a short life. It was was established in 2019 to help develop the economies of “struggling towns” in England. After being provided information by officials in the form of a ranked list, ministers chose a list of 101 towns to bid for funds. Those towns were invited to establish “town deal boards” to undertake the development of plans and bidding.
But the report raises serious questions over the method for selecting locations to participate in the Towns Fund. According to Meg Hillier, chair of the PAC committee, Towns Fund money was granted in a process that was “opaque” and has the appearance of being “politically motivated”.
“Now, when every penny counts, and when some towns that won funding will almost certainly have to redirect it to fill the massive holes the pandemic has blown in their budgets,” says Hillier, “MHCLG must be open and transparent about the decisions it made to hand out this billions of taxpayers’ money and what it expects to deliver.”
The PAC says the selection process for Towns Fund was “not impartial” and gave ministers “discretion” to select towns that could bid for money. “Ministers chose most of the towns from a large group deemed eligible, based on assumptions around broad criteria.”
The PAC is also concerned about the lack of information on the process made available by MHCLG saying the department has a “weak and unconvincing justification” for not publishing the details.
MPs were also concerned that it remains “unclear” how much consultation was undertaken with local stakeholders, such as LEPs, local MPs and directly elected mayors “despite officials recommending to ministers that they do so.”
There are also worries that MHCLG remains unclear about the impact is expects form the Towns Fund, or how it will judge success. The PAC adds that the ministry is “yet to develop monitoring and evaluation processes, or decide how it will measure the impact and success,”of the project.
A host of recommendations are made by the MPs, mostly in relation to providing more information and updating the committee. But the committee also demands MHCLG give assurances within a month that the Towns Fund will abides by managing public money rules. It also calls for more transparency on the selection process and how it reaches funding decisions.
Consistency
For some the Towns Fund is something of oddity. They say it is rare for government departments to be so reticent about how they make funding decisions.
Adrian Jenkins, director of Pixel Financial Management, says the local government sector expects funding allocations to happen in a transparent way according to criteria that can be “consistently applied” nationwide. Opacity doesn’t help councils understand how they access funds or whether the allocation process is fair.
“Judgement will always form part of any decisions about allocations,” he says, “but the basis for those judgements should always be clear. It is very, very unusual for a government not to reveal how decisions about funding have been arrived at.”
There are further issues with the Towns Fund. Based as it is on a bidding system, and with the allocations process “opaque”, it may be some distance from addressing actual “needs” in a local area. Jenkins says the Towns Fund, like business rates pilot schemes, exemplifies a shift from “needs” funding to incentives or bid-based schemes.
“While this approach has its benefits, it runs the risk of not allocating funding to where it is most needed,” says Jenkins.
“And with sever pressures on resources in local government, there is a strong argument for maximising the funding that goes to ‘needs’.”
Room151’s Monthly Online Treasury Briefing
November 27th, 2020
Money market funds and deposit accounts
Watch the recording here
Robust
There are indications that things could change and that some of the criticism has hit home. A spokesperson for MHCLG says the department will consider the PAC’s recommendations and emphasised that selection criteria for towns include the number of people in a location who are out of work or without formal qualifications. MHCLG adds that secretary of state Robert Jenrick had no involvement in a decision to grant Newark a town deal.
“We completely disagree with the [PAC] committee’s criticism of the Towns Fund selection process, which was comprehensive, robust and fair,” the spokesperson said.
“The Towns Fund will help level up the country, creating jobs and building stronger and more resilient local economies.”
Whitehall could be expected to defend its position but the PAC criticism remains stinging. With such a substantial sum of money at stake —Adrian Jenkins observes it is larger than social care funding of £3.475bn for 2020-21—MHCLG will want to shore up confidence in the project and its administration to remain high. the government is under attack from many quarters for alleged “cronyism”. It would not be surprising to see the department adjust its processes and become more transparent in the not too distant future.
FREE monthly newsletters
Subscribe to Room151 Newsletters
Monthly Online Treasury Briefing
Sign up here with a .gov.uk email address
Room151 Webinars
Visit the Room151 channel
